Greater Boston Biotech
The COVID-19 pandemic has put a new spotlight on the nation’s biotechnology industry, one certainly felt in its arguable capital: the Greater Boston area. Over 100 Boston-based companies have begun designing COVID-19 specific vaccines, treatments, or tests. This includes some of the area’s largest employers, such as Biogen, Takeda, Sanofi, and Moderna, as well as many promising and fastgrowing startups. Such crucial COVID work, plus other factors like long cash runways for many companies, have kept the sector generally stable in a turbulent economic time. Companies have largely retained their workforce as evidenced by positive growth in R&D employment. Most broad measurements of investment activity, including VC funding, IPO activity, and stock market valuations, were up in the second quarter.
Greater Boston’s lab market so far reflects the country’s renewed focus on biotechnology. Vacancies remain incredibly tight at 4.3%, essentially the same as the quarter before. While office sublet availabilities rose by over 900,000 square feet, lab sublet availabilities shrank. Tight market conditions meant that rents moved up marginally to $76.35 per square foot net. There are several life sciences companies with large requirements in the market right now. Strong demand from these tenants can’t be met with the existing inventory which is driving development activity in Cambridge, Boston, and Route 128. While few deals occurred on the investment sales front, lab has emerged as a particularly attractive asset class for investors arguably only surpassed by industrial.
Funding levels deserve to be watched. Venture capital investment is the lifeblood for the biotechnology industry as startups require heavy injections of cash in their initial phases. Early indications are that funding has held firm. Roughly $2 billion in VC funding was invested in Greater Boston healthcare companies in the second quarter of 2020, the highest quarter on record. Other major venture capital firms have raised large new funds including Cambridge-based Flagship Pioneering who announced a $1.1 billion fund in April. This hefty level of investment, plus direct government funding for COVID work, should keep demand strong.