Life Sciences Real Estate’s Biggest Deals Of 2021
Any retrospective on a record-breaking year in life sciences real estate revolves around the cold, hard — and often lucrative — fact that demand significantly outweighs supply.
While complete data on 2021 hasn’t been tabulated yet, preliminary figures suggest a string of superlatives around funding, construction and demand. Venture capital investment, well on its way to surging past last year’s record of $33.1B, has created extensive pressure to meet growing demand for lab space across the country.
Despite having 21M SF of lab space under speculative development, startups and biotech firms currently seek 23.8M SF of space. This has led to competition for space at every level, and an incentive for developers to spend exorbitant amounts on development sites and conversion projects to bring product to market more quickly. As the deals below, listed smallest to biggest, suggest, it has caused a significant spike in prices in top markets like Cambridge and Boston that show no signs of leveling off.
Kendall Square Alternative Sees Another Big Campus Conversion
Buyer: Healthpeak Properties
Seller: Clarion Partners
Price: $180M
Market: Boston
Healthpeak Properties, one of the big three national life science developers, has poured extensive resources in Alewife, a section of West Cambridge becoming its own lab and life sciences nexus. This four-building deal for the Cambridge Highlands Campus, which includes lab and office space and a Raytheon facility, followed the $720M purchase of nearby Cambridge Discovery Park in December.
The firm has been so aggressive in picking up property in Alewife, it inspired local lawmakers to consider a moratorium on lab development.
Chinatown Office Sale Comes With Big Price Tag For Lab Conversion
Buyer: Nan Fung Real Estate Partners
Seller: Lincoln Property Co. and ASB Real Estate Investments
Price: $210M
Market: Boston
Hong Kong-based Nan Fung made one of the priciest acquisitions in a supercharged year of deals in Greater Boston, acquiring a relatively new 210K SF Chinatown office building with an eye toward lab conversion. While the immediate plans for the property, at 60 South St., weren’t clear at the time of the August sale, the tower joins a number of Boston-area buildings, including the former headquarters of John Hancock Insurance, finding a second life via biotech.
Oxford Snaps Up Bicoastal Portfolio
Buyer: Oxford Properties Group
Seller: Angelo Gordon and City Center Realty Partners
Price: $276M
Market: Boston/San Francisco
The Toronto-based investment firm made a bold move, establishing the beginnings of its life sciences business with a deal including a trio of Boston properties and the Public Market Emeryville, a mixed-use development near Oakland with extensive lab components. The firm announced plans to invest $500M more into the sites.
Longfellow Plots San Diego Megacampus
Buyer: Longfellow Real Estate Partners
Seller: PS Business Parks
Price: $315M
Market: San Diego
This purchase of a portfolio of nine office buildings across 20 acres in Sorrento Mesa, envisioned as the first step in building a large campus near top research centers such as the Salk Institute, is just a portion of Boston-based developer Longfellow’s plans for San Diego. After a busy year of additional acquisition with the region, the firm now controls 1.3M SF with 1M SF in the development pipeline, per the San Diego Business Journal.
Former Newspaper Office’s Big Story: Lab Conversion
Buyer: Nordblom Co. and Beacon Capital Partners
Seller: Alcion Ventures
Price: $362M
Market: Boston
Classic newspaper office buildings may sadly be too big for modern newsrooms, but their expansive floor plates and ceilings make them ideal candidates for conversion into labs.
And so the home of the Boston Globe on Morrissey Boulevard was sold this year to developers as it gets turned into a combination life sciences, medical and tech campus. Nordblom Co. and Beacon Capital Partners, who bought out private equity partner Alcion Ventures on the 700K SF project, saw promise in cashing in on the larger trend of office-to-lab conversions trying to rush supply into a Greater Boston market desperate for space.
Chicago Firms Sets Sights On San Diego Lab Campus
Buyer: Sterling Bay
Seller: City Office REIT
Price: $576M
Market: San Diego
Chicago-based developer Sterling Bay, best known for tech and office development on the city’s busy near-west side, has made numerous moves this year to make sure it is also taken more seriously as a player in the life sciences sector. This strategic purchase of a portfolio of buildings — which makes up the entirety of City Office REIT's life sciences portfolio — is in the Sorrento Mesa submarket of San Diego, a growing area that also has an ARE campus in the works.
Record-Setting Cambridge Sale Sets New Price Ceiling
Buyer: Alexandria Real Estate Equities
Seller: The Davis Cos. and Principal Global Investors
Price: $815M
Market: Boston
When a pair of East Cambridge properties, One Rogers Street and One Charles Park, sold in December 2020 for $468M, it was a blockbuster. Fast-forward six months, and their price nearly doubled, to $815M. Alexandria’s aggressive buy, bolstering its position in the nation’s key life sciences market, showed that even as development continues at a torrid pace in the Greater Boston area, the price of proximity means that real estate close to Kendall Square can still command incredible premiums.
Dropbox HQ Delivers Massive SF Life Sciences Opportunity
Buyer: KKR
Seller: Kilroy Realty Corp.
Price: $1.1B
Market: San Francisco
There’s been much speculation about transforming office space left empty during the pandemic into lab space. Often, it is left at that, since different uses require different floor heights, tech and layout. Luckily for KKR, the Dropbox HQ it picked up in downtown San Francisco was originally built as a speculative lab development, meaning the 12-story, 750K SF property is rife with leasing opportunities. Dropbox’s decision to go fully remote opened up prime space for new biotech startups.
Alexandria’s Out-Of-The-Park Fenway Pickup
Buyer: Alexandria Real Estate Equities
Seller: Samuel & Associates
Price: $1.5B
Market: Boston
It’s only fitting that the year’s list of biggest life sciences transactions nears the end with two blockbusters in Boston, the first being Alexandria Life Science Equities’ early January pickup of 401 Park Drive and 201 Brookline Ave. from Samuel & Associates, which accounts for 1.8M SF of rentable space. It was a table-setting transaction for what would be a record-breaking year for investment in life sciences real estate, and it touched upon many of the year’s big themes: expansion by any means and price in the Boston market, and the incredible returns Alexandria realized throughout the year, which positioned it to make huge buys like this.
Blackstone’s Blowout Cambridge Deal
Buyer: Blackstone Property Partner Life Sciences
Seller: Brookfield Asset Management
Price: $3.4B
Market: Boston
The numbers behind this transaction are pretty staggering: 2.3M SF, 97% of which is concentrated in Cambridge, the nexus of life sciences and lab space, and financial and legal advice from eight top firms, including Citigroup, Deutsche Bank, Wells Fargo and Morgan Stanley. The scope of this deal underscored just how much capital is being deployed to capture lab space in one of the nation’s innovation capitals. Many trends shaped the year in biotech realty, but the sheer size amount of money being aimed at lab space, from top institutional investors, shows just how much more lucrative this sector has become.
