Greater Boston Lab Market
Q1 2021 LAB MARKET OVERVIEW
BOSTON, CAMBRIDGE & SUBURBS
Greater Boston’s lab market continued its positive momentum from 2020 into the first quarter of 2021. Headlining the quarter was the nearly $4.5 billion in venture capital investment in Massachusetts life science companies, more than double the previous quarterly record. This astounding investment level helped create dozens of companies that need immediate and significantly more space than is currently on the market. As such, quarterly absorption was again strongly positive, sending overall vacancies to 3.3%, among the lowest lab vacancy rates Lincoln has tracked. Rents shot up across the board in response to these strong landlord conditions and tenant demands for higher TI allowances and turnkey lab buildouts. The market’s already large construction pipeline has swelled further as developers look for opportunities in emerging clusters like the Seaport, Somerville, Watertown, and Waltham. The first quarter also saw developers start to outline projects beyond these emerging clusters and bet pioneering locations like Weston, Newton, Burlington, and the Back Bay. The tens of millions of square feet proposed recently might seem frightening, but investors shouldn’t ring alarm bells just yet. New construction has historically leased well and is still largely confined to emerging clusters where demand is strongest. Further, most of this supply is due years from now, and not all the projects proposed will get built.
While venture capital funding has been astronomical post-COVID-19, it has not yet directly translated to high life science hiring levels. Scientific R&D employment in Boston has grown around 5% year-over-year since the onset of COVID-19, significantly better than the broader economy but below the near 12% growth pre-COVID. Job numbers will likely rise in coming quarters as much of this is due to the challenges of hiring in a pandemic. But these companies flush with VC funding and poised for growth will still have to find highly skilled workers to flourish. This all means the war for talent will likely intensify in Boston, meaning finding the right real estate will become all that more valuable for companies to attract and retain qualified labor.