By D.C. Dennison- December 5,2011
A substantial wave of commercial construction is underway in Boston and Cambridge, fueled by more biotechnology-related construction activity than anywhere else in the United States, according to a recent research report from the real estate firm Richards Barry Joyce & Partners LLC.
Of the eight major buildings currently under construction in the Boston area, totaling 2.6 million square feet, more than 2 million square feet is biotechnology related, either laboratories or offices, said Richards Barry Joyce, which surveyed real estate projects in the top 20 US markets.
“These numbers clearly show that we are in the epicenter of the biotechnology industry,’’ said Robert Richards, president of Richards Barry Joyce & Partners.
The only area of the country that has more general construction in progress is New York City, which includes publicly subsidized buildings that are going up at the World Trade Center site in lower Manhattan. The Boston-area projects, by contrast, are all privately funded.
The buildings under construction include four in East Cambridge, two in Boston’s Seaport “Innovation District,’’ one in the Longwood medical area, and one in the Back Bay. The biotechnology companies that are involved in building projects include Biogen Idec Inc., Pfizer Inc., and Vertex Pharmaceuticals Inc.
“This is as active as it has ever been,’’ said Peter Abair, director of economic development and global affairs at MassBio, a biotechnology industry trade association,
The reason for the surge, Abair said, is that “many major pharmaceutical companies went through a difficult restructuring period from 2008 through 2010. But now they have refocused on research and development, and this is a place where the level of biologic and pharmaceutical R&D expertise is very broad and very deep.’’
Since most of the buildings are being built for large companies for their own use, they will be substantially occupied when they open. As a result, the building boom is not expected to lower Boston’s commercial real estate occupancy rate. In fact, during the period covered by the twice-annual report, from April through September 2011, the occupancy rate fell compared to the previous six-month period, from 13.7 percent to 13.1 percent.
The rise in local construction activity is a natural result of the growth in Massachusetts’ biotechnology sector, according to the report, which points out that Massachusetts-based biotechnology companies attracted $553 million in venture capital investment in the two middle quarters of 2011, the period covered in the study. That figure is the largest amount invested in any biotech center nationwide, including California’s Silicon Valley, where venture capitalists invested $485 million.
Brendan Carroll, senior vice president of research for Richards Barry Joyce & Partners, said the growth of clusters in East Cambridge and the Longwood medical area runs counter to the current trend toward outsourcing.
“Location matters in life sciences,’’ he said. “A doctor can park once in the Longwood medical area and teach a class at Harvard Medical School, see a patient at Children’s Hospital, check in on research at the Wyss Institute, and consult on a product at the Merck Research Laboratories. That’s valuable.’’
One potential downside to the rapid growth of Boston’s biotechnology community: a shortage of first-class biotech lab and office space for smaller biotech start-ups.
“The large companies are taking care of their own needs, but that doesn’t leave a lot of Class A space for the new companies,’’ said Carroll. “Some biotech start-ups may have to settle for space in the suburbs.’’
Carroll added that the current level of biotech-related construction shows no sign of abating, citing planned expansions by the Broad Institute and Novartis AG.
“More than a million square feet of biotechnology-related construction is ready to commence next year,’’ he said. “So what we’re seeing now is not a blip.’’
