At the end of the second quarter, Cambridge's overall vacancy rate is 20.2%, compared to 18.3% at year-end 2001. Meredith & Grew's report emphasizes that the slight rise is evidence of the office market's continued difficulties but the biotech market, buoyed by Novartis' lease of 400,000 sf, is faring well.

The report notes that results in the 10.6 million sf office market were mixed in the second quarter. While the tech sector is still weak, transaction velocity improved significantly. Meredith & Grew points out that 235,000 sf of new leases were signed and an additional 230,000 sf of commitments are pending. Office absorption was positive 71,000 sf for the quarter but absorption still remains negative 327,000 sf in total for the first six months of the year. It's still unclear whether the bottom has been hit yet, but the report points out that "it appears the vacancy dynamics may be stabilizing." As of the end of June, the office vacancy rate was 22.9%, a decrease from 23.5% at the end of the first quarter--but still up from 19.8% at year-end 2001.

Predictably, office rents continued to fall from the October 2000 market peak of $70 per sf. Class A space in Kendall Square and East Cambridge are now in the $26 to $36 per sf range while Alewife rents are in the $22 to $30 per sf range.

The big story in the biotech market has been Novartis, which plans to move its worldwide research headquarters from its home city in Basel, Switzerland to Kendall Square. The report quotes the company as saying that it chose Kendall Square because "it puts us in the midst of one of the world's most impressive pools of scientific talent and academic institutions, and will help attract the best researchers and increase research productivity.". Novartis has already leased 258,000 sf at 100 Tech Square and has committed to lease an additional 130,000 sf at 320 Bent Street. The report says that there are also rumors that the company may be looking for an additional 100 to 200,000 sf.

Boosted by Novartis, the biotech market's fundamentals remain strong with low vacancies, good demand and strong absorption. The total vacancy rate for the biotech market is currently a low 5.6%.

Biotech net absorption for the first six months of 2002 totals 591,000 sf, which includes new leases; the completion of two build-to-suit projects--200,000 sf for Millennium Pharmaceuticals at 35 Landsdowne Street and 145,000 sf for Alkermes at 88 Sidney Street--and Amgen's decision to occupy two additional floors of 80,000 sf of space at One Kendall Square.

Biotech rents for new and second-generation lab space continue to be in the $55 to $63 per sf range, depending upon the quality and intensity of lab improvements within a space.

Instant Insights /

City Continues to Tell Two Real Estate Tales

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