Worcester, Lowell Eyed As Next Big Life Sciences Clusters As Costs Rise In Urban Core

As Boston’s life sciences market continue to grow to meet the demand of the companies moving to the region, unexpected clusters are beginning to form in areas where the cost of development and living is significantly lower.

Communities outside of Boston’s urban core and Route 128 belt, including Worcester, Lowell and Fort Devens, have received millions of dollars in investment from life sciences organizations and developers that see major potential for new hubs in the state, experts said last week at Bisnow’s Boston Life Sciences Real Estate Conference, held at 33-41 Farnsworth St.

While Boston and Cambridge continue to be home to the leading life sciences clusters in the state and the nation, some developers and industry leaders say the rise in housing costs and new governmental pressures like hikes in linkage fees might expedite opportunities for communities that are on the verge of a booming life sciences economy.

“They are right on the cusp and in my mind, it’s only a matter of time,” Massachusetts Life Sciences Center CEO Kenn Turner said about life sciences clusters forming in Worcester and Lowell.

Worcester, the second-largest city in the state, is the 15th-best metro area in the U.S. for life sciences research talent, according to CBRE’s Life Sciences Research Talent 2022 report. And it has seen growing interest from both life sciences organizations like MLSC and employees who have flocked to the city to find more affordable living.

MLSC has poured $141M into Worcester, which Turner said he believes is going to be the next big life sciences cluster in the state's central region.

“It’s is a very welcoming community and it’s only an hour away,” Turner said. “Worcester is perfect. It’s got all the right elements: the local leadership completely aligned and welcome to the life sciences, excellent academic institutions, a large international biopharma already established there.”

In May, Worcester hosted a groundbreaking for the expansion of the Massachusetts Biomedical Initiatives’ biomedical center. MBI purchased the 50K SF property at 17 Briden St. and an adjacent 7K SF parcel for $6.2M, the Telegram & Gazette reported. MLSC’s research infrastructure program invested $3M into the $5M expansion project. 

Similar to how Boston and Cambridge are surrounded by numerous research institutions, Turner noted that Worcester is also home to the University of Massachusetts Chan Medical School and Worcester Polytechnic Institute.

Turner said he sees Lowell as No. 2 behind Worcester as a community on the brink of a new life sciences cluster. 

In April 2021, MLSC invested $750K into three Lowell-based life sciences companies: Decoy Therapeutics, EnVision Endoscopy and Haystack Diagnostics. All three of the companies are located in the Massachusetts Medical Device Development Center on UMass Lowell’s campus.

Both of these cities are also on MassBio’s “BioReady Communities” list, a rating system to determine how prepared a town or city is to host life sciences companies. The ranking is based on a number of criteria and ranges from Bronze to Platinum. Like a growing number of cities and towns, Worcester and Lowell have met all the criteria and become a Platinum-level community.

“No disrespect to the Seaport and no disrespect to Kendall Square, which are incredibly important to the health of our ecosystem. These areas are perfect, but they’re maxed out,” Turner said. “That’s the physical reality. We’ve got to look for other places in a nearby orbit.”

Some towns and cities within the Route 128 belt are also seeing more benefits from a growing regional biotech ecosystem.

In Malden, Berkeley Investments’ Exchange 200 secured 90K SF of life sciences leases from three separate companies in October.

Daniel McGrath, senior vice president and director of asset management at Berkeley, said that although cities like Malden are outside of the big clusters, they present a new opportunity for developers that are looking to bring on projects closer to where employees might live. 

“The definition of urban is extending out,” McGrath said. “I think it will become a more regional market than it was three to four years ago. There will definitely be a flight to quality in the inner core, but I do think there is opportunity in some of the suburban markets.”

McGrath said location is also important because of the demographics. He said there is a whole workforce that lives in Malden because rent is lower than in Cambridge or Boston.

Not everyone sees the potential of Boston’s suburbs just yet.

Related Beal Executive Vice President Stephen Faber said that given the competitive nature of life sciences companies, being close to the action is important for any tenant and makes for a better investment in the long term.

Related Beal has put significant investment into Boston’s Seaport and South Boston neighborhoods, including its February proposal for a 99K SF life sciences development at 6 Elkins St.

“Life sciences is highly competitive, and it's all about where your talent wants to be,” Faber said. “We believe that the talent will continue to want to be in the urban core, around amenities, around transportation and around where they want to live and recreate. Our feeling is that the locations that provide those amenities and that transportation and infrastructure will essentially get the lion's share of the business.”

For these bigger life sciences clusters, changes in policy might make it increasingly harder to bring on new development that is crucial as more employees begin to flow into the area. Boston and Cambridge have both begun to raise fees for new projects coming into the market.

In October, Cambridge hiked its linkage fees by 66%, bringing them to $33.65 per SF for labs, offices and other nonresidential development. Boston has proposed doubling linkage fees to $30.78 per SF solely for lab development and raising them to $23.09 per SF for all other commercial development.

“Burdening projects with more costs right now is definitely going to have an impact,” said Tyson Reynoso, managing director at King Street Properties. “It will slow development down, and projects will end up going into a more balanced market where costs are very important. Groups will end up looking to markets where the cost structure makes more sense.”

King Street has a significant presence in Boston’s Allston neighborhood but has also made substantial investments into Devens, a town an hour outside of Boston where it acquired 45 acres to develop a five-building campus dubbed “Pathways Devens.” The 750K SF biomanufacturing campus has already attracted tenants including Azzur Group, which signed a 100K SF lease in May, the Boston Business Journal reported.

Jason Tilley, senior vice president of development at The Davis Cos., said the communities outside of Cambridge will help to fill the need in the state, especially as Kendall Square continues to see low vacancy rates and high rent that some tenants might not want to pay.

“You’re seeing a similar dynamic that we’ve seen historically with some of the near suburbs becoming more pro-life sciences like the Walthams of the world that will continue to fill that need for slightly lower rents in quality areas that both the C-suite and general employees can get to,” Tilley said.