By Bill Archambeault
Journal Staff
Cambridge may be the region's biotechnology epicenter, but demand
for biotech space is also making an impact in the suburbs, from
Malden to Billerica.
In fact, Woburn-based Cummings Properties LLC is planning to redevelop
four or five properties it owns in the Medford area as speculative
biotech buildings.
The decision to develop
speculative biotech properties reflects the faith that real estate
experts have in the biotech industry. It's one of the few encouraging
signs in a sagging market plagued by negative net absorption,
declining rents, increasing vacancy rates and little optimism
for the foreseeable future.
But there's a shortage of lab space available, said Robert Yacobian,
leasing officer for Cummings Properties.
"We just don't have what we need," he said. "We've
made the decision to do speculative lab buildouts in some of our
flex buildings. We're identifying those buildings in our portfolio
that would be appropriate for a lab fit-out."
Of the 8 million square feet Cummings owns in the northern suburban
market, nearly 1 million square feet is leased to biotech companies,
Yacobian said, and he's seen an increase of more than 50 percent
in the last 30 months. In all, the company has leases with 71
biotech companies, he said, including ArQule Inc., CardioTech
International, Collagenesis Inc., Inotek Corp. and Proteome Inc.
The suburbs benefited from the explosion of high-technology companies
a few years ago as companies expanded rapidly and gobbled up land
anywhere and everywhere east of Interstate 495. Now, with biotechnology
looking like one of the safer bets in an uncertain economy, the
real estate industry is anticipating strong demand from biotech
firms.
But unlike the high-flying, high-tech boom, experts consider biotech
less risky.
"It's not the next dot-com," Yacobian said. "It's
a mature industry. It's had its ups and its downs."
Antigenics Inc., a New York City-based company that develops medicine
to treat cancer, infectious disease and autoimmune diseases, doubled
in size from 30,000 square feet to 60,000 square feet this month
at Commerce Way in Woburn, Yacobian said. And there are others
in need of space. Most tenants considering the suburbs are in
search of blocks around 5,000 square feet, though there are requests
for larger ones out there, too, he said.
"Right now, we have three lab companies we're working with
that require 15,000 square feet and six others under 10,000 square
feet," he said.
Daniel Guenther, senior vice president and director of research
for NAI Hunneman Commercial Co. of Boston, said that while many
of the high-profile companies will remain in Cambridge, there
is strong demand in the suburbs as well.
"My impression is that there's pretty strong demand, especially
by the larger pharmaceutical companies," he said. "They're
more comfortable having independent corporate campuses."
But, he said, targeting companies with requirements in the 5,000-square-foot
range is a wise move. Most of those firms, he said, would probably
stay within the confines of Route 128.
`Clearly demand'
Biotech isn't a large enough industry that it can prop up the
region's real estate market, but there is enough demand to warrant
landlords' attention, Guenther said. While Cambridge has a glut
of office space sitting empty, it's far too expensive to renovate
it to accommodate 16-foot ceilings and improved ventilation systems
necessary for lab space.
Rehabbing old single-story flex space, however, is less expensive,
and it can be renovated to fit a company's needs.
Guenther said the biotech industry has accounted for roughly 1
million square feet of net absorption in the last three years.
Most of that absorption--anywhere from two-thirds to three-fourths--ended
up in Cambridge, including Amgen's 285,000-square-foot Cambridge
Research Center, Genetics Institute's 215,000-square-foot 200
Cambridgepark Drive and Lyme Properties' 300,000-square-foot building
for Genzyme Corp. and 275,000-square-foot building for Vertex
Pharmaceuticals Inc.
But Boston and suburban locations are attracting more interest.
"There's clearly demand for laboratory space in the northern
market, and there's very little existing supply," said David
Connolly of Boston-based CB Richard Ellis/Whittier Partners. "It
is fair to say that some of these single-story flex buildings
are appropriate for conversion to lab use."
Zoning pass
But as biotech firms look to the suburbs to meet their space needs,
some towns are positioned better than others. Biotech firms are
looking for locations where local zoning regulations encourage
biotech use and where other firms are clustered.
"Communities that have already put out the welcome mat, biotech
firms are focusing on them," Guenther said.
Christopher Maietta, vice president at Combined Properties Inc.,
a Malden-based property owner and developer, is following the
city's efforts to revamp its zoning regulations to encourage biotech
use.
"In the case of some communities, they don't really have
an extensive R & D welcome mat of any kind. It was more of
an ancillary use," he said.
That works against cities and towns trying to tap into the biotech
market because they still have to compete with the drawing power
of Cambridge. With Harvard University, the Massachusetts Institute
of Technology and teaching hospitals next door in Boston, smaller
towns have to do more to attract clusters of biotech firms.
The VC factor
Venture capitalist firms also play a role, Maietta said. Some
insist that the companies they're backing be located in Cambridge.
Combined Properties had talked to one early-stage biotech firm
that was seeking 40,000 to 50,000 square feet of space. The company
had considered one of Combined Properties' sites, but ultimately
passed, Maietta said.
"What determined that they wouldn't come to Malden was their
funding sources felt it was important to be in an established
location and be able to recruit the necessary people," he
said. "The rationale was that unless you were in one of these
no-brainer locations, the company might have trouble attracting
and retaining people."
Maietta said there are concerns about landlords relying too heavily
on one industry, especially when fitting out space is expensive
and tailored to a specific company.
"Anytime you're banking on one horse, there's risk associated
with it," Maietta said. "How deep is the vein to be
tapped?"
Guenther said that while dependence on a single industry does
increase exposure, the biotech industry will continue to play
an important role in this region.
"It looks like a strong industry overall," he said.
