Coronavirus Pandemic Prompts Surge in Demand for Boston Lab Space
As the epicenter of life sciences and biotech in the United States, Boston has become ground zero for the research and development of vaccines and therapies related to the coronavirus. Although the COVID-19 pandemic has wreaked havoc on the economy, job market and virtually all aspects of life, it has triggered a major uptick in demand for lab space in Boston. Such space has been exceedingly rare for many years now, and current construction is not expected to keep pace. As a result, some firms are opting to convert office space into lab and life science space, which is certain to transform Boston’s commercial real estate markets even more.
Amid the hundreds of biotech and life sciences firms that are scrambling to assist with the COVID-19 effort, two of them – both headquartered in the Boston area – have been driving demand for additional lab space. The two firms, Moderna and Alnylam Pharmaceuticals, have received more than $2.5 billion in investment funds since the pandemic started. These funds are earmarked for spurring therapeutic and vaccine-related research for COVID-19, and much of it will need to be used to develop additional space for both firms.
Moderna, which received $483 million in federal funding, is working on a COVID-19 vaccine and plans to hire an additional 150 people. Currently, the company occupies 200,000 square feet of space at a multi-building campus in Cambridge’s Technology Park. Those leases extend through 2029, and the company has the option to extend them. The firm also holds a lease on a 200,000-square-foot manufacturing facility in Norwood that continues through 2032 and may be extended for two additional 10-year terms. Recently, the company also signed a lease for another 222,000 square feet of office and lab space in Norwood.
Meanwhile, Alnylam received a $2-billion investment from Blackstone, the private equity firm. With its partner, Vir Biotechnology, the firm is working to bring late-stage development drugs to market faster. These drugs focus on treating COVID-19 and other diseases that are related to the coronavirus. Alnylam currently leases more than 500,000 square feet of office, lab and manufacturing space across four locations in Cambridge, including its headquarters at Kendall Square. It will also soon lease a 200,000-square-foot manufacturing facility that is currently under construction in Norton.
The pandemic struck right when an already tight market was being squeezed even tighter. Indeed, during the first quarter of 2020, net absorption for lab space in metro Boston rose to 889,000 square feet – one of the highest totals on record. Most firms had already been squeezed out of Cambridge, which led to increased construction activity in places like the Seaport and Southie. Numerous construction projects were already underway in 2020 when a moratorium was imposed due to COVID-19. As part of the initial lockdown, nearly all construction projects across Boston were forced to stop. That moratorium was phased out, and all construction projects are now permitted to continue. Still, there is certain to be a backlog due to the interruption – and it is unlikely to be filled any time soon.
Due to the extreme dearth of suitable lab and life science space across Boston, many firms have been forced to convert other types of space to suit their needs. The best example of this can be found in the work that is being done by Nan Fung Life Sciences Real Estate. The Hong Kong-based firm is currently converting several properties into lab space, including 601 Congress, 51 Sleeper Street and 1 Winthrop Square. As construction continues struggling to keep pace with demand, this trend is certain to intensify.
What does all of this mean for real estate buyers and investors in Boston? For one thing, it means that COVID-19 hasn’t made a dent in the unprecedented demand for quality lab space in the city. If anything, the pandemic has increased demand for such space, and those who own it are very well-positioned indeed. However, investors and buyers should look beyond Cambridge, where even upcoming space has already been claimed. Instead, places like the Seaport, South Boston and even Watertown are worth another look. Stay tuned to Boston City Properties for ongoing information regarding commercial real estate across the area.