Boston

BOSTON-Traditionally the biotechnology sector takes a backseat to the A-list office market, however biotech has remained stable throughout the economic down-cycle and appears the stronger investment in the short-run. Until the market rebounds, biotechnology is the most thriving market in Great Boston's real estate market, says Richards Barry Joyce & Partners' bioSTATus report.

"If you go back 12 months, you basically have an investor base which [wants] to see some sort of revenue and profit generation from some sectors," explains Brendan Caroll VP of research for Richards Barry Joyce & Partners. "Biotechnology seems to be that sector."

Massachusetts is home to 7.9% of the pharmaceutical pipeline, globally. With one-tenth of the world's population, the Bay State holds a commanding portion of this industry. This bodes well for the properties in this area.

There is some contrasting data, however as vacancy in the suburbs, the primary base for biotech in Greater Boston, rose from 9.7% to 10.4%. The highest concentration of availability, ironically has been the suburbs, as opposed to the more expensive East Cambridge and Boston. Caroll points to the differing types of biotech companies that cause this disparity. "There is the more mature company that needs to access a more seasoned, more experienced type of labor pool," he explains. "And that type of company is not the type of company that is under pressure," noting companies like Genzyme. "These companies continue to execute their growth strategy. On the other hand," he continues. "You have companies who located in the suburbs who tried to save cost." As the economy turned, the relocation was not enough to save the company's finances and many of them contracted or folded.

The larger companies, however seem to be making up the ground for some of the smaller companies' financial difficulties, as these larger entities thrive in the current market. East Cambridge has benefited particularly from this evolutionary process.

"[The larger companies] have been able to accommodate their growth needs because some other companies have come under serious growth constraint and serious cash constraints," Caroll tells GlobeSt.com. "So, essentially, it's almost that the companies are doing well and continue to expand because these other companies are making room for them by contracting or moving." The backfill is the thing.

Over the last year, Altus and Oscient in Waltham; Synta and Epix in Lexington; Helicos Biosciences, CombinatoRx and Biopure in Cambridge have all run into financial problems, some of which leading to disposition of property or assets. Advantageously, Vertex took over 145,000 square feet at 88 Sidney St. after Alkermes left; Forsyth Institute grabbed 73,000 square feet at 245 First St. from CombinatoRx; 45 Sidney St. moved Novartis into 39,000 square feet of former Millennium Pharmaceuticals space; and Archemix moved out of 33,000 square feet at 300 Third St., which was then snatched up by Alnylam.

The threat to any adamant market is a flowing pipeline that eventually waters down the area's value, but biotechnology is well-suited here, as it is only awaiting one building to finish up: 650 Kendall St. The property is delivering in Q4 of 2009 or Q1 of 2010. Once that comes through, the pipeline is empty. "Because of the timeline to build these properties, there will not be a new [property] for at least three years," he explains.

"It does appear that despite financial challenges, use of biotech space appears to be stable if not slightly increasing," Caroll concludes. "The absorption in the property type has remained positive. Since the end of 2007, there has been an 11.1% increase in the use of that space. At the same time, while there has been a dramatic [swell in biotech], there has been a flat use of office space."