Greater Boston

Life Sciences Outlook | United States | 20171

CambridgeAs the global hub of R&D for the life sciences industry, Cambridge has become extremely competitive with high quality lab space hard to come by. The core of Cambridge’s advantages lies in the self-sustaining ecosystem in Kendall Square, which encompasses major academic institutions, top-notch research facilities, VC firms, startups and global corporations.

Core SuburbsLife sciences tenants have recognized the added value the suburbs provide. As rents rise and space becomes extremely limited in Cambridge, tenants have looked to the inner suburbs as a relief valve. No longer just a lower cost alternative, the suburbs are becoming an attractive option due to landlords strategic investments in the core suburban markets, luring tenants with amenities and new Class A developments.

CBDSimilar to the suburbs, the tightening Cambridge market has led several big-name tenants to explore potential lab space downtown, particularly in the Marine Industrial Park. Given its urban location, the Seaport offers a uniquely attractive option. With a growing lab developments pipeline, the Marine Industrial Park is poised to rise as a life sciences cluster.

Greater Boston possesses the largest concentration of life sciences researchers in the United States, and has over 4.0 million square feet of requirements.

Home to many of the global leaders in tech and life sciences, the Kendall Square neighborhood in East Cambridge has been touted by some as “the most innovative square mile on the planet.”

Major lab supply:Clusters of established lab stock with long-time industry presence

Life Sciences manufacturing supply:Clusters of manufacturing space devoted to pharmaceutical, biological or medical device & instrument manufacturing

Emerging lab supply:Areas with limited lab stock today that are poised for growth

95

495

90

Cambridge

North

Northwest

LongwoodMedical Area

128/Mass Pike

495/Mass Pike Seaport District

Life Sciences Outlook | United States | 20172

The Greater Boston Area is home to many elite academic and research institutions, as well as world-class medical facilities. This includes the top three NIH-funded hospitals in the United States. The region also boasts 250,000 students across 52 higher education institutions, such as internationally renowned Harvard and MIT.

Boston’s economy is fueled by a large concentration of healthcare professionals, with life sciences employment accounting for 4.5 percent of the regions total employment, one of the highest proportions amongst the life sciences clusters. Over the last decade, the life sciences industry has added over 13,000 jobs, putting Boston at the top of tech and science capabilities.

The regions strong life sciences community continues to attract venture capital dollars, bringing in 1/6th of the total US life sciences funding in 2016. The high activity in venture capital funding is reflected in Boston’s significant growth in establishments. Over the last decade over 400 establishments were added, the majority of them in the R&D field.

10%

24%

8%2%

52%

4%Pharma & medicine

manufacturing

Electromedical instrument

manufacturing

Medical equipment & supplies

manufacturing

Testing laboratories

Research & development

Medical & diagnostic

laboratories

ScorecardEconomic

Life sciences employment composition

Life sciencesemployment

86,371

non-labusing

labusing

3%13%

9%

6%

61%

8%Pharma & Medicine MFG

Electromedical Insturment MFG

Medical Equipment & Supplies

Testing Laboratories

R&D

Medical & Diagnostic Laboratories

Life sciences establishment composition

Life sciences establishments

2,083

Workforce Total life sciences% Life sciences to private

employmentYear-over-year

growth

Employment 86,371 4.5% 1.4%

Establishments 2,083 1.7% 5.5%

Funding Total life sciences % To total U.S.

VC funding $3,094.9m 30.1%

NIH funding $2,161.1m 8.8%

Inventory Total supply % Total vacancyAverage asking

rent (NNN)

26.8M s.f. 7.3% $42.85 p.s.f.

Cluster score: 82.3

Cambridge

Life Sciences Outlook | United States | 20173

East Cambridge

Leasing activity fueled by strong

VC and M&A markets

• The Cambridge lab market has continued to see strong activity in the VC and M&A markets, fueling over 1.3 million square feet in leasing transactions in 2016.

• M&A offers top pharma companies the opportunity to partner on new technologies and refill their drug pipelines. The access to new and innovative companies will continue to attract pharma giants to Cambridge.

• One side effect of M&A activity is consolidation of space. Following its acquisition of Ariad, Takeda added 221,000 square feet at 125 Binney Street to the sublease market. Elsewhere an uptick in vacancy could spark concern, but in Cambridge the added space provides momentary relief and opportunity, as it is likely to lease quickly.

• As the market continues to tighten, tenants currently occupying lab space in Cambridge are vehemently holding onto it. Renewals in 2016 almost doubled 2015’s volume and brought the share of renewals from 14.6 percent to 36.9 percent of yearly transaction volume.

West Cambridge

Speculative developments

underway

• West Cambridge continues to develop and establish itself as a competitive lab cluster, and particularly a high quality and lower cost alternative to Kendall Square.

• The Davis Companies has two speculative lab developments underway in West Cambridge. The first, 75 Moulton, is a 37,500-square-foot complete renovation that will deliver Q3 2017. The second, 35 CambridgeParkDrive, is 223,000 square feet and will deliver mid 2018.

• King Street Properties also has plans to develop in West Cambridge, with a proposed 120,000 square foot facility adjacent to their existing 87 CambridgePark Drive.

• Leasing activity has been consistent and strong in West Cambridge. Fueled by accelerated growth and recent acquisition activity, Celgene grew their footprint by 42,000 square feet to a total of 125,000 square feet at 200 CambridgePark Drive in the start of 2017.

Facilities scorecard

SupplyEast

CambridgeWest

Cambridge

Rentable lab stockOwner occupied lab stock(% of total lab stock)

7.7M s.f.2.6M s.f.38.4%

725K s.f.0 s.f.5.2%

Total vacancy(Change year-over-year)

6.8%+3.5 ppts

0.3%-0.3 ppts

# of large blocks over 50,000 s.f. 6 0

Under construction (s.f.) 589K s.f. 261K s.f.

Demand

# of requirementsTotal s.f. requirements

281.13M s.f.

5103K s.f.

Pricing

Average asking rent (NNN)(Change year-over-year)

$75.05 p.s.f.+10.2%

--

Jounce Therapeutics780 Memorial DriveMid Cambridge51,400 s.f.

75-125 Binney StreetEast CambridgeRba: 384,000 s.f.Available: 221,000 s.f.Sublessor: Takeda

399 Binney StreetAlexandria Real Estate East CambridgeRba: 172,000 s.f.SpeculativeQ4 2018

245 First StreetEast CambridgeRba: 278,000 s.f.Buyer: Clarion PartnersSeller: Jamestown$1,044/sf

Activity key: LeasingSalesUnder constructionLarge blocks of space

Recent activity

Suburban

Life Sciences Outlook | United States | 20174

Core Suburbs

New developments continue to

lure tenants to the suburbs

• The Core Suburban lab market, which contains rentable space in Bedford, Lexington, Waltham, and Watertown has seen significant rent growth in recent quarters, reaching $42.65 per square foot NNN in Q1 2017.

• The inner suburbs have become an attractive option for lab companies priced out of Cambridge. Multiple companies have migrated to the suburbs to take advantage of the competitive pricing, amenity-rich properties, and new development offerings.

• Exosome Diagnostics made the move from Cambridge to 28,086 square feet at 266 Second Avenue in Waltham. A spin-out of Cambridge-based Biogen, Bioverativ, also made the move to Waltham, leasing up the full building of 112,500 square feet at 225 Second Avenue.

• Furthermore, Wave Life Sciences has now leased the entire 91,000 square feet at King Street Properties' new development 115 Hartwell Avenue in Lexington. With the decision to break ground in 2016, 115 Hartwell Avenue represented the first ever speculative lab building in the suburbs. Wave Life Sciences is scheduled to occupy by Q3 2017.

• With a growing development pipeline, including King Street Properties’ 828 Winter Street in Waltham and their 200,000 square foot planned addition to Hayden Research Campus in Lexington, the suburbs will continue to grow as a cluster and attract tenants through 2017 and future years.

Facilities scorecard

Supply Core Suburbs

Rentable lab stockOwner occupied lab stock(% of total lab stock)

2.9M s.f.1.4M s.f.15.8%

Total vacancy(Change year-over-year)

12.6%+0.4 ppts

# of large blocks over 50,000 s.f. 4

Under construction (s.f.) 235K s.f.

Demand

# of requirementsTotal s.f. requirements

311.43M s.f.

Pricing

Average asking rent (NNN)(Change year-over-year)

$42.65 p.s.f.+21.2%

Wave Life Sciences115 Hartwell AvenueLexington91,000 s.f.New development

Bioverativ225 Second AvenueWaltham112,500 s.f.

Merck CampusLexingtonRba: 387,354 s.f.Buyer: King Street Properties/ Carlyle GroupSeller: Merck & Co.$431/sf

828 Winter StreetKing Street PropertiesLexingtonRba: 145,000 s.f.

Activity key: LeasingSalesUnder constructionLarge blocks of space

Recent activity

Boston CBD

Life Sciences Outlook | United States | 20175

Seaport District

Urban lab developments

underway

• Already an established tech market, the Seaport is well positioned to elevate itself as a lab micro cluster.

• While office and residential has dominated the Seaport’s transformation, lab development potential, coupled with the unbeatable proximity to amenities and urban offerings, has generated significant interest and buzz from lab tenants and developers in recent years.

• The Seaport’s evolution into a lab market began in 2014 when Vertex Pharmaceuticals completed its global HQ, relocating from East Cambridge into 1.1 million square feet at 50 Northern Avenue and 11 Fan Pier Boulevard.

• Institutional capital in lab property continues to grow, and investors are on the look out for the next emerging life sciences market in Boston. Related Beal has targeted the Marine Industrial Park, with the purchase of 27 Drydock Avenue at the end of 2016 for $512/square foot. Related Beal also broke ground on phase I of Innovation Square, or iSQ, in late 2016. Upon completion it will bring 375,000 square feet of lab space to the Marine Industrial Park.

• As the life sciences industry expands technology is becoming an increasingly critical element for companies in the field. The proximity to the Seaport’s existing tech cluster will provide a significant advantage for tenants.

Longwood Medical Area

Best-in-class life sciences

community

• Home to 6 of Boston’s top 10 NIH funded institutions, the LMA contains over 18 million square feet of clinical, research and administrative space within 213 acres. However, with a majority of buildings institutionally owned, there is limited rentable lab space.

• With tenants like Dana Farber, Boston Children’s Hospital and Harvard Medical, the LMA is a crucial component of the success of Greater Boston’s life sciences community.

Facilities scorecard

SupplySeaport District

Longwood

Rentable lab stockOwner occupied lab stock(% of total lab stock)

1.4M s.f.0 s.f.5.2%

1.1M s.f.1.7M s.f.10.6%

Total vacancy(Change year-over-year)

4.2%+1.0 ppts

3.0%-2.3 ppts

# of large blocks over 50,000 s.f. 0 1

Under construction (s.f.) 375K s.f. 0 s.f.

Demand

# of requirementsTotal s.f. requirements

10261K s.f.

00 s.f.

Pricing

Average asking rent (NNN)(Change year-over-year)

$70.12 p.s.f.+10.3%

$75.00 p.s.f.-

Decibel Therapeutics1325 Boylston StreetFenway30,294 s.f.

360 Longwood AvenueLongwood Medical AreaRba: 414,000 s.f.Available: 83,550 s.f.Owner: Alexandria Real Estate

27 DrydockSeaport DistrictRba: 286,160 s.f.Buyer: Related BealSeller: Zoom Group$512/s.f.

Innovation SquareRelated BealSeaport DistrictRba: 375,000

Activity key: LeasingSalesUnder constructionLarge blocks of space

Recent activity