The following are excerpts from ULI New England’s Sitelines by Michael Hoban
While the various segments of the Greater Boston commercial real estate industry grapple with how to return to operations safely as the global pandemic persists, the region’s life science sector continues to thrive. Acquisition, development, and leasing of laboratory properties remain robust in Boston and Cambridge as well as in the submarkets, according to a panel of life science property owners recently assembled by ULI Boston for the virtual discussion, “Life Science’s Role in the Metro Boston Economy.”
Anchored by a dense concentration of top-tier universities and research hospitals, Boston/Cambridge is consistently ranked as the nation’s top life science cluster. In 2019, the region landed at or near the top for critical metrics such as employment, lab space, National Institutes of Health (NIH) funding, patents, and venture capital funding, according to a report by Genetic Engineering and Biotechnology News. That position is unlikely to weaken despite the pandemic, since panelists predict an increase in the development of biomanufacturing facilities – brought on by disruptions in the worldwide supply chain due to COVID-19, as well as an anticipated upswing in natural disasters triggered by climate change.
JLL managing director Molly Heath reports there is a continued steady demand for lab space as well as a growing demand for biomanufacturing space. A number of significant new leases have been signed post-COVID, and 88% of the more than 2.5 million sq. ft. (232,000 sq m) of pre-COVID life science requirements are still being actively pursued.
With demand showing no signs of slowing, the owners on the panel are remaining active on both the acquisition and development fronts while simultaneously adapting existing properties to meet the needs of their tenants, which are largely continuing their work.
This means that, unlike other sectors of the commercial real estate industry, tenants continue to pay rent, which allows acquisition and development to continue. What that new development will look like for the industry is likely to change, however, both in the types of facilities that are being constructed and where they will be located.
One of the trends panelists mentioned is the increased demand for biomanufacturing facilities. While demand for traditional research lab space shows no signs of slowing down in the Greater Boston market, the disruptions to the global supply chain have increased the need for not only localized biomanufacturing facilities, but also supporting infrastructure. Bill Kane, executive vice president of BioMed Realty, says that the supply chain disruptions are causing delays to the way their tenants can perform their work, and adds that according to industry insiders, big pharma is willing to pay a premium for land and labor costs to remain local.
Much of the biomanufacturing expansion is likely to take place outside the Boston/Cambridge core. Rob Albro, managing director at King Street Properties, says, “There’s specific needs of biomanufacturing tenants, many of which are not in existing buildings. It’s an evolving industry and one that we think is going to grow a lot.”