Office and Lab Space Still in High Demand at Kendall Square in Cambridge
Although reports indicated that the cost of office and lab space in highly in-demand Cambridge was beginning to drop at the beginning of 2019, that appears to have been merely a blip in an ongoing trend toward sky-high rents and limited availability. Home as it is to MIT, Harvard and countless other universities and think tanks, it seems only fitting that Cambridge in general and Kendall Square in particular have become a true innovation hub in the region and country. However, the startups and young tech companies that made it what it is today are now being forced out; how long will this trend last?
Average office rents for the third quarter of 2018 in Cambridge hovered around $82 per square foot. The figure for lab space was closer to $85 per square foot. The city as a whole had a vacancy rate for office and lab space of just 3.6 percent, which falls far below the national average of 10.5 percent. Despite the fact that more than 950,000 square feet of lab space was added to the market in 2015 – and another 1.5 million square feet was slated to be added in the following year or two – the market here continues to be among the most cutthroat in the nation.
To say that office space is in demand in Kendall Square would be a major understatement. An incredible 76 percent of the aforementioned 1.5 million square feet of space that was being added had already been leased before construction was even completed. That trend appears to be continuing to this day and has intensified to the point where many small tech companies and startups are officially priced out of the market – and even the rate of new construction can’t seem to make a dent in the ever-escalating prices.
Despite the fact that Cambridge as a whole boasts upwards of 11.2 million square feet of commercial office space and more than 14.6 million square feet of life science space, including lab space, the market here continues to be incredibly competitive. Many startups and incubators that would previously have set up shop at Kendall Square are now moving outward toward Fresh Pond and Somerville. In such areas, rents are about 30 percent lower, and availability is a bit better – but just a bit.
Many other firms are moving further afield to places like Watertown. In the last few years, in fact, well-known firms like Sonos, Rapid 7 and Addgene have sought greener pastures there and in downtown Boston and Somerville.
Given how much investment activity is being focused on the region, it should come as no surprise that the commercial real estate market here is so hot. Over the last two years alone, Massachusetts has averaged about $6 billion in venture capital funding and another $2.8 billion in NIH funding – and the majority of those funds are going directly to life sciences and biotech firms in Boston and Cambridge.
Perhaps the biggest development in the market here of late is the construction of Cambridge Crossing, which has already snared several huge tenants. For example, Sanofi Genzyme signed a 900,000-square-foot lease in December for two of the new buildings at the development. The first building on the new 43-acre-campus, which is expected to be delivered by the end of the year and totals 430,000 square feet of space, had already been 80 percent leased by early 2019.
If you are in the market for office space in Cambridge – especially at Kendall Square – you will need all of the help that you can get in this highly competitive market. Boston City Properties is here to help, so contact us today for more information.