Report Concludes Demand for Biotech Space Will Increase in Suburbs

The ''BioStatus" report, assesses the industry, which it says "has experienced steady tenant demand during the last 18 months," and its current and future needs for space. According to the report, the presence of several prestigious teaching hospitals, universities as well as a well-educated workforce accounts for the state's "unprecedented" growth in the biotech industry.

The firm's research team developed that Massachusetts Clinical Growth Index as a tool to quantify the industry's demand for space. According to the Index, 57% of the 23 biotech companies in the state--there are 281 in total--that are currently testing various drugs are in the first two of the four phases of clinical testing. 31% are in the third phase of testing.

The report notes that until recently, the growth of the state's lab market has been centered around the universities and hospitals in the city's Longwood Medical Area and Cambridge's Kendall Square area. But, it points out, "with the increasing growth of the biotechnology industry, suburban development of several laboratory clusters around the state has occurred." The two main areas of growth have been in the Route 128 West area and in Worcester. In the city, growth has been seen from LMA to the Boston Medical Center area. Over the next two years, LMA will see an additional 1.5 million sf constructed but this will not contribute to the overall availability, as most of these projects are build to suit for institutional use.

Across the state, 1.9 million sf is currently under construction or is being converted specifically for lab use. In Boston alone, the current vacancy rate for the lab market is a low 2.3% with over a million sf being marketed as possible lab conversion possibilities. The limited opportunities in LMA have pushed many firms to look in other city neighborhoods such as Roxbury and Charlestown.

Similarly, in Cambridge, direct vacancy rate for lab space is 2.2%. The report notes that over the next 18 months, an additional 1.7 million sf will be constructed or converted to lab space in this city. Several property owners in Cambridge are repositioning their assets for biotech conversion which could add an additional 1.6 million sf to the inventory. While most of the biotech space is centered around Kendall Square, the neighborhood of Alewife could emerge as a major lab market.

High rental rates in Cambridge for biotech space coupled with low vacancy rates have fueled the emergence of "cost effective lab solutions in the suburbs," the study indicates, specifically in Route 128 West and North and 495 West and Worcester. Direct vacancy for lab space in the area is 4.9% with an additional 185,000-sf to be converted or constructed within the next 18 months.

An additional 2.9 million sf of space is poised for possible conversion to lab space but the report concludes that it is likely that the "vast amount of buildings slated for possible conversion both in Cambridge and the suburbs will not become lab space" due to a number of factors affecting the industry, mainly the difficulty many of these companies will have raising capital and the long cycle in drug development and approval processes.