BIO WATCH

BOSTON | SPRING 2015

entry: purchasing research materials, renting lab

space and hiring a talented, highly educated labor
pool are only a few of the high-ticket items needed
to get in the proverbial door not to mention the
groundbreaking idea, drug or device under development. With drugs taking as long as 10 to 15 years to
grow from concept to Food and Drug Administration
(FDA) approval, companies need significant funding
in order to survive. Even if the product is approved,
the firm generally survives for a time on limited
earnings never mind a profit. Fortunately, the life
science sector has found success in securing public
funding in the shape of National Institutes of Health
(NIH) grants. It is also the beneficiary private venture
capital (VC) funding. In fact, despite its small size,
Massachusetts received the largest amount of biotech venture capital over the last two quarters - more
than the entire state of California - by $200,000,000.

MASSACHUSETTS
BIOTECH BEGINNINGS
In 1977, Cambridge, Massachusetts became the
worlds first city to govern the handling of genetic
material through the Cambridge Recombinant DNA
Technology Ordinance.1 At the time, DNA intelligence
was in its infancy it was only 25 years earlier that
Watson and Crick discovered the double helix. However, it was well known that the discovery would be
critically important to understanding diseases and to
the future development of pharmaceuticals. Massachusetts and Cambridge in particular has been
at the forefront of biotechnology since the fields
inception. While Cambridge benefits from proximity
to academic prowess, it was the communitys early
acceptance of biotechnology that enabled the industry to flourish.
From big pharma to seed stage start-ups, establishing a life sciences company has steep barriers to

1.55 B

VENTURE CAPITAL FUNDING

Q4 2014-Q1 2015
1.15 B

189 M
127 M
Massachusetts

Bay Area

San Diego

Philadelphia
Metro

62 M
DC/Metroplex

53 M
NY Metro

Massachusetts received 41.5% of the total US Biotech VC

funding over the last two quarters.

Source: DTZ Boston Research and PwC Moneytree

According to a November 2014 study released by

the Tufts Center for the Study of Drug Development,
it takes more than $2.5 billion over the course of a
decade to bring a novel medicine to market.2 While
the study was criticized for discounting early-stage
NIH investments and orphan drug tax credits, $2.5B
is still a long way from the $802 million estimate the
center released in its last study in 2003. The rise in

development costs is due in large part to the focus

on complicated diseases that are difficult to treat
such as Alzheimers. And research on these types of
diseases is risky the study estimated that just 12%
of compounds undergoing clinical testing make it to
approval.
What does this have to do with real estate?
As a result of skyrocketing R&D costs, larger companies are opting to acquire or partner, rather than generate in-house a development pipeline.3 Most recently, Roche successfully completed a tender offer for a
57% majority stake in Cambridge-based Foundation
Medicine. The companies are expected to collaborate in four areas of R&D: integrating Foundations
tumor profiling platform into Roches clinical development, developing new diagnostics in the areas of
cancer immunotherapy and circulating tumor DNA
analysis, co-developing companion diagnostics, and
developing in vitro diagnostic kits for Foundations
tests.4 Foundation Medicine signed an expansion for
38,000 SF at 10 Canal Park in January (just 2 years
into an 8-year lease) the firm also occupies 61,000
SF at 150 Second Street.

SUBMARKET COMPARISON

SEAPORT (BOSTON)

The Seaport may have started as Bostons Innovation

District, but in recent years, 50 Northern Avenue has
become one of its more prominent buildings - home to
Vertex Pharmaceuticals. Vertex has made strides in the
improvement of cystic fibrosis therapeutics and looks to
further benefit their patients with their New Drug Application for combination therapy for CF - sent to the FDA in
November of 2014.
Next door, at 155 Seaport Boulevard, is the 21,000
square-foot headquarters of Intarcia Therapeutics. Intarcia
has recently had positive results testing its subcutaneous
drug delivery system for daily management of chronic
diseases. As a result of its early success, it secured an
impressive $200M in venture capital funding in 2014.
But not all of the Seaports life science firms need expansive footprints - at the other end of the neighborhood is 27
Drydock Avenue. Home to a handful of smaller biotech
companies - such as Immunetics, AbVitro Inc. and Ad
Biotech - the facility has historically provided economically
priced office and lab options.

360,000 SF project could provide a relief valve for companies seeking centrally located lab space.

LONGWOOD MEDICAL AREA (LMA-BOSTON)

While the majority of the space in Longwood is owner

occupied, DTZ tracks five buildings totaling just over 1.5
MSF that are leased commercially. However, due to its
proximity to world class hospitals (Brigham and Womens,
Boston Childrens Hospital, Beth-Israel, Dana Farber) and
medical education facilities (Boston University, Harvard,
Massachusetts College of Pharmacy and Health Sciences), its rare for space to become available for lease. As a
result, vacancy has been below 15% since the mid-1990s
and below 1.0% for the past three years.

SUBMARKET MAP

*Most active submarkets for Life Science real estate

Methuen
deals.
Lawrence
N. Andover

495 North

Andover

Tewksbury
Chelmsford

Westford

And the Seaport offers new construction opportunities.

One of the largest building opportunities still available in
this neighborhood is the proposed Innovation Square at
Northern Avenue project. Located at the corner of Northern Avenue and Tide Street, the site is no longer restricted
to water-dependent use and is zoned for laboratory use
and biopharmaceutical manufacturing - a prime option for
large companies. With only a few blocks over 50,000 SF
available in Kendall Square (and 7 companies looking for
at least that much lab space in Cambridge), this proposed

Lowell

Lynnfield

Boxborough

Concord

Marlborough

Wakefield

Burlington 128

Acton

495 WEST

Stoneham

Bedford

Woburn

Maynard

Lexington

Lincoln

Medford

128 Central

METROWEST

Weston

Southborough
Natick

Wellesley

Revere

CAMBRIDGE

Somerville
Allston
Brookline BOSTON

Newton

128

Needham
Quincy
Hingham

128 South

Hopkinton

Westwood

495 South

Weymouth

Dedham

Norwood

Braintree

Canton

Randolph

Franklin

Seaport At A Glance
NIH Funding

Rockland

Milford

$1,713,737,264

Venture Capital (2014)

$208,500,203

Vacancy Rate

0.0%

Largest Tenant

Vertex

Source: DTZ Boston Research, NIH.gov, and PwC Moneytree

Norwell

3/24 South
Foxborough

24

Pembroke
Brockton

Mansfield

Taunton

Most of us already know that Cambridge is the life science

epicenter of New England - and arguably the country.
Approximately 20% of all biotechnology firms registered
in Massachusetts are located within a mile radius of East
Cambridges Kendall Square neighborhood - 50% are
within 5 miles.
At just over 6.0 MSF, the East Cambridge lab market is
the largest in greater Boston and obviously the most
popular. Prime spaces are leasing at over $70 PSF NNN
a 7.5% increase over the past year. And vacancy stood
at a minuscule 3.3% at the end of the first quarter. Despite
these tight conditions, well-established tenants are doing
whatever it takes to maintain or establish a presence in
East Cambridge. Large companies such as Amgen, Genzyme, Pfizer and Novartis have all decided that location
trumps price when it comes to the importance of proximity
to great minds and innovative culture.

What is a scientist after all? It is a

curious man looking through a keyhole, the keyhole of nature, trying to
know whats going on.
-Jacques Yves Cousteau (1910-1997)

MAJOR CAMBRIDGE DEALS 2014-2015

With only a few blocks of space available over 50,000 SF

and, at last count, 7 tenants touring the market for at least
that much space, we expect rents to climb considerably in
the next 12 to 18 months. Recent deliveries and projects
under construction include: Pfizers facility at 610 Main
Street, and Novartiss Campus at 181 Massachusetts
Avenue.

TENANT

SF

ADDRESS

Baxter International

200,000

650 East Kendall St

Alnylam Pharmaceuticals

295,000

675 West Kendall St

Agios

113,000

88 Sidney St

However, the latest development news is Genzymes

headquarters relocation it will move from 340,000 SF
at 500 Kendall Street into 251,000 SF build-to-suit at 50
Binney Street in August of 2018. Despite the decrease in
square footage, the new building will not contain an atrium and will therefore be able to house the 950 current
employees as well as accommodate anticipated growth of
350 new employees.

Amgen

79,000

200 Cambridgepark Dr

Dicerna

40,000

87 Cambridgepark Dr

Biogen

152,664
renewal

10 Cambridge Center

Momenta

78,454
sublease renewal from
Vertex Pharmaceuticals

675 West Kendall St

Genzyme

251,000

50 Binney St

Biogen

93,000
sublease from Ironwood
Pharmaceuticals

301 Binney St

Biogen

79,683

301 Binney St

Saugus

Malden

Waltham

Framingham
Westborough

Beverly

Peabody

Wilmington

Littleton

Hudson

Danvers

128 North

Billerica

CAMBRIDGE

Cambridge At A Glance
NIH Funding

$331,458,725

Venture Capital (2014)

$1,211,232,900

Vacancy Rate

10.0%

Largest Tenant

Novartis, Pfizer, Biogen

Source: DTZ Boston Research, NIH.gov, and PwC Moneytree

Source: DTZ Boston Research

128 CENTRAL

Major tenants clearly see a value in this - Shire has

recently committed to 202,000 SF at 95 Hayden Avenue
in Lexington and 104,000 SF at 235 Wyman Street in
Waltham. The company will shift its U.S. operational headquarters from Chesterbrook, PA to Lexington, MA where
its rare disease business unit is based. The announcement came shortly after Chicago-based AbbVie called off
its proposed $55 billion acquisition of Shire.

AVERAGE
LIFE SCIENCE
DEAL

Venture Capital (2014)

$235,104,201

Vacancy Rate

17.1%

Largest Tenant

Shire

NIH Funding

$3,079,266

Venture Capital (2014)

32,500,101

Vacancy Rate

39.1%

Largest Tenant

Sanofi/Genzyme

CAMBRIDGE

128 CENTRAL

$41.50 GROSS

$61.25 NNN

$35.00 NNN

BASE RENT

$39.50 PSF

$57.00 PSF

$30.00 PSF

$50.00 PSF

$37.00 PSF

$10.00 PSF

While most pharmaceutical companies tend to congregate

in Cambridge, medical device and diagnostic companies
have taken a liking to the 495/Metrowest Corridor. Genzyme is one of the more visible tenants in the submarket,
but others include Boston Scientific (300 Boston Scientific
Way, Marlborough), Quest Diagnostics (200 Forest Street,
Marlborough), Berg Pharma, AB Sciex and Heartware
(all at 500 Old Connecticut Path, Framingham) as well
as Boston Heart Diagnostics and rEVO Biologics (both at
175 Crossing Boulevard in Framingham). 495/Metrowest
continues to be the most economical option for tenants
seeking research and development space. At $19.00 PSF
NNN, asking rents have remained stable for the past three
years and are more than 70% lower than those in Cambridge.

495 WEST

6,750 SF

21,820 SF

47,650 SF

EFFECTIVE RENT

TI PACKAGE
**Average deal over the last 12
months within each submarket.

$49,457,893

Source: DTZ Boston Research, NIH.gov, and PwC Moneytree

4,460 SF

SIZE

NIH Funding

495 / MetroWest At A Glance

Cubist Pharmaceuticals (a recent acquisition of Merck)

also resides on Hayden Avenue. Additionally, Winter
Street in Waltham is another hot spot for life science firms
- GlaxoSmithKline, AstraZeneca, Histogenics, Alkermes,
Immunogen and Fresenius all make it their regional
homes.

SEAPORT

495/METROWEST

128 Central At A Glance

While 128 Central does not generally receive as much

attention as Kendall Square, its tenant composition is
comparable. However, 128 Central offers lab space at half
the price of Kendall Square. It also offers free parking.

$19.15 NNN
$18.00 PSF
$20.00 PSF

FREE RENT

0 MONTHS

0 MONTHS

0 MONTHS

4 MONTHS

TERM

5 YEARS

4 YEARS

5.6 YEARS

3 YEARS

BUILDING CLASS

A-

Source: DTZ Boston Research

SOURCES

PUBLIC LIFE SCIENCE COMPANIES WITH MA PRESENCE

Cambridge, Massachusetts, Municipal Code 8.20.

Tufts Center for the Study of Drug

Development. Cost to Develop and
Win Marketing Approval for a New
Drug is $2.6 Billion. N.p., 18 Nov.
2014. Web. 30 Apr. 2015.

495 NORTH

495 WEST

Waltham

Somerville

495 SOUTH

WORCESTER

BIOTECH SECTOR BREAKDOWN WITHIN MA

128 NORTH

Bioinformatics 3%

Boston

Marlborough

128 CENTRAL
128 SOUTH

28

Agricultural Industrial 4%

METROWEST

Carroll, John D. GSKs New Boston

Collaboration Chief Goes anti-pharma as He Prowls for Partners. FierceBiotech. N.p., 2 Sept. 2014. Web. 19
Mar. 2015.

Karow, Julia. Roche to Use Foundation Medicines Test in Phase III

Anti-PD-L1 Drug Trials. GenomeWeb.
N.p., 22 Apr. 2015. Web. 30 Apr. 2015.
4

Medical Device 5%

BOSTON

Human Diagnostic
Development 6%

5
CAMBRIDGE

INNER SUBURBS

33
Research Product
& Instruments 11%

Source: DTZ Boston Research

LARGEST RECENT DEALS

Contract Research
& Manufacturing 16%

675 W Kendall Street

Cambridge

251,000 SF

50 Binney St
Cambridge

650 E Kendall
Cambridge

I-495
11%

88 Sidney Street
Cambridge

79,000 SF

78,454 SF
MOMENTA

Route 128
31%

PHARMACEUTICALS

AGIOS

10 Cambridge Center 1 Research Drive

Cambridge
Westborough

93,000 SF

AMGEN

113,000 SF

BIOGEN

114,000 SF

GENZYME

152,664 SF

BIOGEN

GE HEALTHCARE
200 Forest Street
Marlborough

200,000 SF

BAXTER INTERNATIONAL

209,855 SF

GENZYME

ALNYLAM

295,000 SF

301 Binney Street 200 Cambridgepark 675 W Kendall Street

Cambridge
Cambridge
Cambridge

Drug Development 55%

Boston
Inner
Suburbs
11%

LARGEST TENANTS IN MA BY SQUARE FEET

Cambridge
47%

Sanofi / Genzyme 2,260,000 SF

Biogen 1,190,000 SF
Novartis 1,440,000 SF
Pfizer 1,120,000 SF
Vertex 1,180,000 SF
Source: DTZ Boston Research

Source: DTZ Boston Research

For More Information, Contact:

Ashley E. Lane
Vice President, Research
DTZ
One International Place
Boston, Massachusetts 02110
Direct Tel: +1 (617) 279 4570
Ashley.Lane@dtz.com

Matthew B. Smith
Research Analyst
DTZ
One International Place
Boston, Massachusetts 02110
Direct Tel: +1 (617) 279 4589
Matthew.Smith@dtz.com

One International Place

10th Floor
Boston, MA 02110