Takeda/Global Arts Live | 585 Third Street | Kendall Square

Gameguy326

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Wonder if this unprecedented lab space demand ever crashes and what that would look like. Feels like a bubble to me at this point
Takeda has leased lab space all over Cambridge, especially in Cambridgeport. I think this is an effort to lease fewer buildings and have more people in the same location.

I believe the reason lab development is taking off even more since COVID is that it's more resilient to the new nature of work. People can telecommute for office work in many cases. People have to physically be in lab space to do lab work, meaning it's more likely to be leased.

I don't think this is a bubble (are pharmaceutical companies going to crash?), but I do worry what it means about Kendall Square as an "innovation" district. If the big office/lab space is only/primarily available to big corporations with deep pockets that have the coffers to lease it, what happens to the agile startups? There are lots of incubators and smaller-scale office/lab space in the district for now, but it's something to keep an eye on.
 

Blackbird

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If the big office/lab space is only/primarily available to big corporations with deep pockets that have the coffers to lease it, what happens to the agile startups?
Maybe they move more to places like Somerville, Medford, Watertown, or Revere? Wouldn’t necessarily be a bad thing, would it?
 

Gameguy326

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Maybe they move more to places like Somerville, Medford, Watertown, or Revere? Wouldn’t necessarily be a bad thing, would it?
Not the worst, but I think it would be better if the big time corporations who want lots of space were the ones who moved to the areas with more space. The advantage of Kendall Square is lots of people with lots of diverse ideas and lots of investors in high density, that value added is diminished if it becomes a smaller collection of bigger players.
 

bigpicture7

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^ @Gameguy326 , I agree fully with the goal of maximizing opportunities for smaller teams / startups, maximizing the diversity of the types of technologies being developed, etc. But you're never going to get cheap rent in brand new construction on a parcel where you had to spend millions moving a natural gas station and digging up all of the surrounding streets, etc.

Check out this story of how (many years ago) startups got cheap rent near Kendall in not-so-fancy buildings (the subject property has of course since been completely redone by new landlords, but that's beside the point):
We bought the Boston Woven Hose property for under $5 a square foot, and we said we wanted to position ourselves as a cheaper alternative because we thought we could renovate those buildings and be competitive. Even though it’s older space, we think it’s interesting. We’d be the lowest-cost alternative.
What's needed is to look for opportunities to repurpose buildings that are old-ish, but at/close to being up-to-code. The equivalent of "class B" space with good bones. That's actually not that crazy of a concept: Kendall does now have a decent amount of aging 80s-era buildings that are not (in their present state) candidates for big $ leases to the giants, especially with the changing nature of office work and space demands. Smart policy would be to somehow incentivize parceling out such semi-obsolete-but-safe-enough space for cheaper rent opportunities.
 

goody

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^ @Gameguy326 , I agree fully with the goal of maximizing opportunities for smaller teams / startups, maximizing the diversity of the types of technologies being developed, etc. But you're never going to get cheap rent in brand new construction on a parcel where you had to spend millions moving a natural gas station and digging up all of the surrounding streets, etc.

Check out this story of how (many years ago) startups got cheap rent near Kendall in not-so-fancy buildings (the subject property has of course since been completely redone by new landlords, but that's beside the point):


What's needed is to look for opportunities to repurpose buildings that are old-ish, but at/close to being up-to-code. The equivalent of "class B" space with good bones. That's actually not that crazy of a concept: Kendall does now have a decent amount of aging 80s-era buildings that are not (in their present state) candidates for big $ leases to the giants, especially with the changing nature of office work and space demands. Smart policy would be to somehow incentivize parceling out such semi-obsolete-but-safe-enough space for cheaper rent opportunities.
I feel like the same general economics of supply and demand which underpin housing gentrification apply here and that the root of the problem is is a lack of supply of new luxury project that is causing commercial gentrification of these class B spaces. I suspect that this is made worse by the fact that commercial users, especially lab and technology users, have inelastic demand for location because they value adjacencies to competitors, collaborates, and other agglomeration economies more highly then less specialized or less resource intensive uses such as housing or general office space.

This is one reason I find it so frustrating that Kendall isn't being built out at higher density. It seems pretty clear to me there is demand for significantly more space than what is currently proposed across the neighborhood at rents that would support taller developments. The lower density is largely due to zoning and NIMBYism but I also suspect the fact that most of the neighborhood is controlled by three REITs and MITIMCO isn't helping, as they have effectively created a cartel to control the market.

So while I agree protecting some level of class B space to allow for innovation is important to the overall ecosystem of commercial users and start-ups, of the lack of supply and the limited ownership of properties in Kendall make the opportunity cost of the keeping dated spaces affordable 'impossible.'

Edit: What is interesting to think about is that 'creative destruction' is changing Kendall but one assumes, or hopes I guess, that a 'new Kendall' which serves the same purpose as the the 'old Kendall' is evolving somewhere else in the city. To Bigpicture7's point, I would worry less about trying to protect class B space in Kendall (a costly uphill battle) and focus more fostering a 'new' center for lower cost innovators elsewhere and also working to get more space built in Kendall in hopes of taking pressure of rents.
 
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bigpicture7

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I feel like the same general economics of supply and demand which underpin housing gentrification apply here and that the root of the problem is is a lack of supply of new luxury project that is causing commercial gentrification of these class B spaces. I suspect that this is made worse by the fact that commercial users, especially lab and technology users, have inelastic demand for location because they value adjacencies to competitors, collaborates, and other agglomeration economies more highly then less specialized or less resource intensive uses such as housing or general office space.

This is one reason I find it so frustrating that Kendall isn't being built out at higher density. It seems pretty clear to me there is demand for significantly more space than what is currently proposed across the neighborhood at rents that would support taller developments. The lower density is largely due to zoning and NIMBYism but I also suspect the fact that most of the neighborhood is controlled by three REITs and MITIMCO isn't helping, as they have effectively created a cartel to control the market.

So while I agree protecting some level of class B space to allow for innovation is important to the overall ecosystem of commercial users and start-ups, of the lack of supply and the limited ownership of properties in Kendall make the opportunity cost of the keeping dated spaces affordable 'impossible.'
I completely agree with this. My point was simply that the lower cost rent alternatives (if they are even ever possible to achieve) are not going to be in the complex megabux new construction projects. Rather, if enough density of the new stuff can be built, then there's the possibility that people might actually be motivated to rent out the existing old stuff at/close to its as-is state, rather than to feel more compelled to gut-renovate it and lease it at new-build leasing rates. But, to your point, the latter is only possible if the Kendall market is filled with enough Class A stuff to satiate that demand.

Even thought it feels quaint to look back at the '70s/'80s, the basic economic concepts are the same. In the article I linked above, they discuss how Boston Properties had just been greenlighted to build hundreds of thousands of square feet of new construction in the heart of Kendall. That's part of what enabled this other guy to profitably rent cheaper stuff a couple of blocks outboard of the core.
 
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