Greater Boston Lab Market

Q4 2020 LAB MARKET OVERVIEW
BOSTON, CAMBRIDGE & SUBURBS

Greater Boston’s lab market had another strong showing in the fourth quarter of 2020. Capital continues to flow into the sector, driving record activity on the demand and supply side. More than $4.8 billion in venture capital funding flowed into Greater Boston biotechnology companies from 20Q1 to 20Q3. This three-quarter total is already above any annual figure in Boston’s history. Investors have responded by flooding the real estate market with cash, betting big on existing buildings, potential conversions, and ground-up development sites. This includes some of the largest current players in Boston’s real estate world, such as Alexandria, Related, and Blackstone, plus some new entrants such as Phase 3 Partners, IQHQ, and Oxford Properties.

Quarterly absorption was strongly positive, and declining vacancies were reported in Cambridge, Boston, and the Suburbs. Sublet availabilities only slightly increased, driven by the large-scale leases that have been signed recently. Rents maintained their positive upward trajectory, setting high marks in Boston, Watertown, and Waltham. Beyond the real estate fundamentals, the fourth quarter also gave us perhaps the best example of the innovation and progress that life science companies can produce in Greater Boston. Cambridge based Moderna received emergency approval in December by the FDA for its mRNA-based COVID-19 vaccine. Upwards of 100 million doses are currently and will soon be distributed throughout the US, hopefully allowing the COVID-19 crisis to come to an end.

LOOKING FORWARD

The market’s supply pipeline is massive and moves so fast that it can be challenging to track. The current under-construction pipeline totals 4.5 million square feet, a record high but not astronomical compared to its history. The planned pipeline, however, is swelling. More than 9 million square feet of supply is permitted, and significantly more has been proposed post- COVID-19. The good news is that if lab demand continues at its historic rate, much of this supply should be absorbed. Further, new supply will provide tenants more space options and keep Boston competitive with other more affordable and emerging biotechnology clusters across the country.