160,000 SF in Leasing Signals Biotech Burb Shift

WESTBOROUGH, MA-Two recent large lease deals that further increase the biotech presence in the suburbs could be the start of a slow shift in emphasis from Cambridge to this area for that market as extremely low vacancy rates there continue to make it difficult to find biotech space and lease rates remain high even as they are dropping in all other areas of the market.

Genzyme corp. leased 85,000-sf of space at 3400 Computer Dr., a building owned by EMC Corp. The Cambridge-based biopharmaceutical company already has space in nearby Framingham and will be building out this space to convert it to biotech lab space. In another deal, Amersham Biosciences Inc., a Piscataway, New Jersey-based biotech company leased 75,000-sf of space on 15 Walkup Dr. from Carruts Capital.

“Between the two deals it’s certainly an indication that there are biotech companies looking out here,” Brian McKenzie, a partner at Richards Barry & Joyce who specializes in the Route 495 market, tells GlobeSt.com. “These companies are finding they don’t have to pay Cambridge rents.”

The difference in rent is significant. McKenzie notes that in the Genzyme deal, the tenant will pay $18.95 gross per sf for an “as is” deal, meaning the tenant will do the build out. McKenzie says that the market rate in this area ranges from the high teens to low $20s per sf. “Given what Genzyme will put into the building, it’s a good transaction,” he says. In Cambridge, rents are in the $50s to $60s per sf for a triple net range while Route 128 is seeing rents in the low to mid $30s per sf for a triple net range.

McKenzie points out that part of the appeal of this area’s space for biotech is the fact that some of the electronic lab space that was developed for high tech companies can be used as a starting point to develop lab space. In the Amersham deal, Selectron had previously occupied that space and had developed electronic lab space on the site. While Amersham, which signed a ten year lease, will have to modify the space, the tile floors, high ceilings and specialized cooling facilities that are required for biotech lab space are already there.

“We are seeing that there are buildings used by high tech that have the basic infrastructure for biotech use,” says McKenzie, who adds that its Route 128 as well as 495 that is starting to see this phenomenon. “In these cases these buildings were not marketed for biotech, but the tenants saw the opportunity.” he adds.

In Marlborough, McKenzie says that his firm showed Genzyme a 130,000-sf space at 111 Locke Dr. that was previously occupied by Corning for high tech research and development use. “It was well-suited for conversion to biotech use,” he says. “We are chasing biotech companies like Genzyme and Amersham.”

As to the impact these latest deals will have on the vacancy rates in the area—which hover in the mid 20% range—McKenzie notes that it will take another two to three years of this kind of activity to “significantly lower and stabilize the market.” EMC alone still has 550,000-sf of space in the area that McKenzie says is partially unoccupied and that the company is looking to sublease.