Cambridge Is Officially The Land Of The Labs

The city across the Charles River from Boston became a lab-dominant market in Q2 2017, and its new status is pushing away tech companies that call Cambridge home.

“You’re looking now at a total lab inventory of 11.7M SF,” Colliers International Director of Research Aaron Jodka said. “All of a sudden, it teetered over and it does not look to go back to office.”

Cambridge’s lab inventory has grown 94% since 2000, with 5.7M SF of new labs added since the millennium, and it is easy to see why. JLL has ranked Greater Boston and San Francisco the top two life science clusters in the country for the last two years, but the New England market is significantly ahead at No. 1. Greater Boston receives more than $2B in National Institutes of Health funding and has more than 86,000 life science workers. The Bay Area gets less than half the funding and has just under 68,000 employees in the industry. 

While the East Cambridge submarket, which includes Kendall Square, has been lab-dominant for years, this is the first time the entire city has had more lab space than office. A flurry of new construction and office-to-lab conversions in areas like the Alewife submarket are partially behind the trend.

“Life science companies both old and new are clamoring to be in Cambridge because of its unique reputation, access to top industry talent and proximity to transportation,” The Davis Cos. Development Group President Brian Fallon said. “The Alewife area in particular presents an ideal value opportunity for companies looking to establish themselves and grow at a prestigious location that represents success in life science.”

Cambridge is one of the tightest research and development/lab submarkets in the world. As a result, speed to market is critical, Fallon said. TDC is working on two speculative lab buildings in Alewife. The firm recently completed the conversion of the 38K SF 75 Moulton St. into lab space. Work is also underway on the Alewife Research Center, a 223K SF Class-A lab building at 35 Cambridgepark Drive designed by architecture firm SGA. 

The lab expansion into western Cambridge and the Route 128 suburbs comes as rents are at an all-time high and space is at an all-time low. Asking rents in East Cambridge are in the mid- to upper $70s/SF and individual spaces can get into the $80s, according to the Colliers Q2 2017 Greater Boston Market Viewpoint report. Direct lab vacancies in the entire city are only at 2.6%, driving a flurry of development. 

Alewife has been poised as a natural spillover market for the tight East Cambridge submarket due to its proximity to the Red Line, ability to pull from the same pool of residents and workers and a growing supply of housing around the train station. 

“Think of all the apartment development around the station, where thousands of people now live,” Jodka said. “It has fundamentally changed that part of Cambridge to be more of a draw, both for residents and product.”

This is not to say all life science companies are looking to leave Kendall Square. Of the 5.7M SF of proposed, permitted, under construction or just-completed lab development in Cambridge, 92% of it is in East Cambridge.

Many tech companies that have been longtime office tenants in Kendall Square are expanding elsewhere as their landlords choose to convert buildings to lab space to accommodate the growing life science industry. While it maintains a presence in the neighborhood, Microsoft announced in early 2016 it was moving nearly half its employees out of Kendall Square to a Burlington office it gained through its Nokia acquisition. Amazon announced last week it was continuing its expansion outside the neighborhood with a new 150K SF office in Fort Point. 

“It’s a bit of a culture shock for these tech tenants who have been in Kendall for quite some time,” Jodka said. “There is the tension and feel of ‘do I have to be here?’”