by Lenny Pierce, Research Analyst
The story of the East Cambridge lab market in recent quarters has been one of dwindling space and $60 rents that biotech and pharmaceutical companies seem consistently happy to pay. Part of this phenomenon stems from the area’s proximity to employee producers like MIT and Harvard, but another factor is how much more valuable the region becomes with each new life science company that moves there. Decision makers at these organizations value being close to similar companies as this clustering effect allows for regular dialogue between the various groups – interactions that could always lead to the generation of applicable new concepts in their given fields. With rents so high, one would think that smaller groups who can’t afford to set up shop in East Cambridge might miss out on this “Kendall Square Effect” altogether. However, with an uptick in leasing activity outside of East Cambridge over the last 12 months, there could be a handful of smaller new life science hubs producing that same dynamic – and companies aren’t paying $60 a square foot to be a part of it.
Two of these micro-hubs are right next-door – West Cambridge and Watertown. Groups like Tetraphase, Forma, and Enanta are already in Watertown with more tenants likely to gravitate to the region that is a reasonable commute from attractive residential areas like Newton, Wellesley, Belmont, Waltham, Weston and additional cities in the upscale Route 128 West submarket. Formerly the home of over 500 Pfizer employees before its move to Kendall Square, the Alewife area can expect Dicerna Pharmaceuticals to fill Pfizer’s space at 87 CambridgePark Drive shortly. Upon completion of a $50 million renovation of the building by owner King Street Properties, the building will have a more open environment which could be attractive to incoming groups eager to have extra-close contact with Dicerna. Right down the street from said property, 200 CambridgePark Drive recently landed Amgen for 80,000 square feet, furthering life science density in the area. Rents in both Watertown and West Cambridge are currently in the $40-per-square-foot range.
In one fell swoop, pharma giant Vertex created a biotech hub on its own with its relocation from Cambridge to 40 Northern Avenue in the Seaport. The 15-year deal, which consolidated all of the company’s operations to Fan Pier, constituted the largest commercial lease in the history of Boston at $1.1 billion for a 1.1 million-square-foot lease. A few months later, New York City biotech Keryx set up shop right next door at One Marina Park drive after first using the Seaport’s District Hall as temporary office space. Dune Medical Devices joined the party as well, moving into 25 Thomson Place less than two years after the Vertex construction began. The Seaport is also home to the Dana Farber Cancer Institute, which shares 27 Drydock Avenue with life science groups, Immunetics, Inc., Smiths Detection and Cytonome. The prices in said venue are looking nothing like those in East Cambridge, usually hovering somewhere around the $30-per-square foot range.
You can even find micro-hubs in those suburban locations that are more than just a T-ride away. In addition to a handful of smaller life science companies, Cubist Pharmaceuticals is headquartered in Lexington, employing 370 at 65 Hayden Avenue. Lexington is also the U.S. headquarters location of Shire Pharmaceuticals, which will be relocating 500 people from Chesterbrook, Pennsylvania, to the Lexington campus (already home to 1,300 employees) throughout 2015. And Shire isn’t the only Irish pharma with a taste for the burbs – Alkermes has been on Winter Street in Waltham since 2010, just across from fellow life science giant Immunogen. AstraZeneca, Genzyme, and PerkinElmer also have campuses in Waltham. Groups moving to Lexington and Waltham can expect to pay around $30 per square foot, while companies wishing to join Celgene, Anika Therapeutics and Life Technologies in Bedford could be looking as low as the mid to high $20s if they like what they see for space at 18 Crosby Drive or the handful of lab-ready spots on Burlington road.
On the far side of 495, Worcester provides an example of how, as in Cambridge, educational facilities can be a major driver in the formation of a life science hub. UMass’ School of Medicine and Graduate School of Biomedical Sciences act both as generators of potential employees and as collaborators that, unlike an actual pharmaceutical company, won’t ever pack up shop and move elsewhere once the lease is up. Worcester also has three Massachusetts Biomedical Initiative (MBI) campuses. MBI is a private, independent economic development organization, which helps fast track the development of fledgling life science companies by providing cost-effective, high quality lab space as well as a trained support staff to assist with operations. These factors made Worcester a welcoming locale for groups such as Agilux, Blue Sky BioServices and Zata Pharmaceuticals.
It has been clear for a while that existing in a life science hub has critical value for biotechs and pharmas. The newer idea is that this hub doesn’t need to be Kendall Square. The increasing density of life science groups in areas like Watertown and Lexington could mean that the sacred intellectual commingling so readily associated with Cambridge could be available in a handful of other locales. If this phenomenon is truly replicable in these new areas, could having a Bedford address on your letterhead someday pack the same reputational punch as the coveted words “East Cambridge”?