Greater Boston Lab Market


The Boston lab market continued to hit speedbumps in Q1 2023, with vacancies expanding for the third consecutive quarter. With biotech IPO activity and VC funding falling further from the peaks reached in 2021, many startup and medium-maturity firms have contended with drying funds, leading to thousands of layoffs and reduced space requirements. The sublet rate also nearly doubled over the last 12 months, finishing last quarter at 3%. Recent vacancy expansion is mostly attributable to empty space in newly delivered properties, with roughly one-third of space opened since Q4 2022 still on the market. New deliveries have also attracted plenty of leasing activity, helping to boost absorption totals. Net absorption exceeded 600,000 SF in Q1 2023 and 1.8 million SF over the last 12 months. On the investment side, deal volume slowed throughout the year, and just a couple lab transactions closed in Q1 2023.

While a handful of development projects have stalled or been cancelled amidst the market’s recent setbacks, overall supply continues to ramp up. Nearly 70 million SF is under construction, permitted, or proposed; of which roughly 17 million SF is under construction and 20 million SF is permitted. Investors remain bullish on lab, especially compared to the office sector. Several recently traded office properties are planned for redevelopment to lab, and more than 14 million SF of the pipeline is in conversion projects. The pipeline is spread throughout the metro, with large projects in the market’s historical center of Kendall Square, as well as emerging life sciences hubs like the Seaport, Fenway, and the 128 West submarket.


Despite recent headwinds, fundamentals in the Boston lab market remain in solid position. Despite cooling since 2021, vacancies and VC investment totals in Q1 2023 were still healthy compared with historical averages. The market’s increased availability rate also offers breathing room for expanding tenants, as opposed to when occupancy rates were nearly full across the metro and many companies who desired to expand could not find the space to meet their requirements. Most of the available sublet space is in the Class A segment, offering additional options for tenants seeking top quality space. While fundraising through the VC and IPO channels may continue to prove difficult, Big Pharma has stepped up its leasing and M&A activity. Over the last 12 months, 46 biotech M&A deals closed, worth a combined $120 billion. Big Pharma also signed several of the market’s largest leases of 2022, including deals from Takeda, AstraZeneca, and Eli Lilly. The pharmaceutical giants reportedly have another $200-$500 billion in cash still on hand, and further leasing and M&A activity could continue to boost the market.