How A Developer Turned A Rundown Square Into The Nation's Top Biotech Hub
How did Cambridge, and in particular Kendall Square, become the biotech hub that it is today?
Alexandria Real Estate Equities has been instrumental in the growth of the Kendall Square market since the California company, headed by Joel Marcus, replicated the successes it had on the West Coast in providing office and lab space to the growing biotech industry.
In the early 2000s, soon after Novartis announced plans to open a facility in Kendall Square, Alexandria started buying office properties in the submarket. By converting the space to labs, the company, which owns 6.3M SF in the greater San Francisco area, was able to fetch twice the rent.
Beginning in the mid-2000s, the company redeveloped the Binney Street corridor as a biotech campus. Now the corridor is home to a raft of biotech names: Biogen, Bluebird Bio, Constellation Pharmaceuticals, Sage Therapeutics, Sanofi Relay Therapeutics and others.
"Kendall Square is to science what New York is to finance, what Paris is to culture, what Washington is to government," Novartis Institutes for Biomedical Research President Jay Bradner tells Bloomberg.
Alexandria has also made a succession of major acquisitions in the market in recent years, such as One Kendall Square, as well as dispositions.
Bristol Myers-Squibb Co. is the anchor tenant in Alexandria's latest building, 100 Binney St., which is 100% leased. Even non-life science tech is represented there, with Facebook as a tenant.
Boston Properties Inc. and BioMed Realty Trust Inc., now owned by Blackstone Group, are other major players in the market. But Alexandria is still the largest (after MIT), with 4.8M SF in holdings and 164K SF under development.
With the growth of Alexandria has come the emergence of Cambridge as a biotech hub. Currently more than 60 public companies with a combined market cap of about $170B are headquartered in Cambridge.
Vacancies are low and rents are correspondingly high. Vacancy in Cambridge’s 12.1M SF lab market is 2.5%, and sublease space is nearly gone as of mid-2018, Colliers International reports.
Tenants continue to struggle to find available space, and yet there will be continued growth. In 2017, biotech in Massachusetts received $3.2B in venture funding, up 3.4% compared with the year before.
As important as Alexandria has been to the development of Kendall Square and the Boston-area tech industry, the company doesn't put all of its eggs in one market.
According to Alexandria's Marcus, by 2022 the greater Boston market will not be as dominant in the company's asset base as it is today. Alexandria is looking to markets like San Diego, Seattle and New York for further growth.
In Seattle, for example, the company acquired 701 Dexter Avenue North in the Lake Union South neighborhood this summer for $33.5M as a spot for future development, and also bought an eight-building life science portfolio in Maryland for $146M.
