The New Office/Lab Thread

Equilibria said:
Again, while I personally agree with you, if you're an office manager it depends on the approach. If everyone is there Tu-Thu then yes, you need enough space for everyone. If you delude yourself into thinking that people will evenly distribute across all 5 days then you only need 60% of the space, and that 40% costs a lot of money in Boston. Most actual firms are probably somewhere in-between.

I get that you're praising this particular firm for having enough space to be comfortable, and I join you in that.
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We are on the same page; my parenthetical edit, above, posted after your reply addresses what you are saying
 
DBM said:
453 Washington & 80 Summer both got the residential conversion treatment years ago, as did a fairly good number of other Ladder District properties. The low-hanging fruit got converted in the aftermath of the 2007-09 crash--8 Winter, 407 Washington, The Conrad, and others.

What's left is, by definition, properties that weren't so ripe for conversion, when the 2010s boom for them took place--and therein lies the immense challenge. If the less-desirable ones weren't exploitable during the immensely favorable economic conditions of the 2010s, then... how can they be converted now, with interest rates through the roof, etc., absent a massive (and thus highly unpopular?) government subsidy?
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I am v late to this discussion but think this is an interesting one. I think the distinction here is that conversions didn’t happen in the golden days of the 2010s because the office and lab market were also strong, thus demand could compete with residential and or the gap in value wasn’t so wide that costly conversions were feasible.

If residential values stay strong and the value of office properties fall significantly then conversions should start becoming possible. I think there are generally three options to how this will play out:

1. Free market: the bottom collapses out of the office market and a bunch of institutional owners lose their shirts. Unclear if there is systemic risk to the larger economy if this were to happen, so there is that to consider at the highest level. Thankfully because commercial leases are longer term, this market is less volatile in terms of “vacancy.” Though the longer the WFH trend continues the more likely a significant market correction is going to happen, its already starting. Once the bottom collapses out of the market and owners are bleeding money on vacant buildings/ the value of the assets fall low enough, some conversions will start to happen. The key here is the base value of suitable office product must drop significantly because of excess supply and lower rents/lower absorption.

This path suggests a lot of pain for investors and likely an extended period of uncertainty for both investors and the city with lots of vacant offices as the market proves to what extent the office/lab market is over supplied.

2. Free market with government coordination: This is the same economic conditions as above but where the city is proactive in acknowledging a permanent shift in the demand and hopefully removes as many entitlement barriers as reasonable to aid fast and easy conversions. As-of-right development is a BIG carrot for development at this scale. Folks don't want to throw good money on a burning money pile only to be raked over the entitlement coals. In this scenario I suspect conversion would start happening sooner and ultimately more properties would be converted.

This likely provides a significant amount of new housing and should aid the stabilization of the office market more quickly as you’d be removing excess supply more quickly. I think this is what the city is trying to do, and it should be low cost to taxpayers.

3. Subsidies: it is what it sounds like. Government provides subsidies to help make numbers pencil. This could very well be in the long-term best interest of the city and tax payers as vacant space is not generating economic actively, isn’t maximizing tax revenues, is bad for the public image of the city, potentially generates unsafe conditions, etc.

I think the easiest way to do this would be to waiver select development and impact fees, granting development bonuses where they make sense, and perhaps using TIFs that would lesson a development’s tax burned for some period of time.

As noted, lots of smaller prewar buildings could be pretty easily converted. The larger buildings are a bigger challenge. My short list of dimensionality ‘plausible’ high-rises are Central Plaza, the JFK Building, Fed Reserve, 28 State, 200 Clarendon, and 500 Boylston.

None of these are a dead ringer, two are federal buildings (so that isn’t going to happen overnight if ever). 200 Clarendon is a flagship building and is likely too valuable as office and Central Plaza just underwent significant capital improvements. All of which to say, I wouldn’t hold my breath for high-rise conversions unless things get really, really, bad in the office market.
 
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Teeing up the next cycle.

Rapid advances in biology and technology will combine with the growing health needs of an aging population to fuel a “scientific renaissance” over the coming decade, the chief executive at drug giant Pfizer told Boston business and civic leaders Tuesday.

“Those two [trends], when they come together, will produce solutions that were impossible to find before,” helping to treat long-intractable diseases such as Alzheimer’s and cancer, Pfizer chief executive Albert Bourla said at a downtown luncheon hosted by Boston College’s Chief Executives Club.
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In its biggest deal this year, the New York-based company paid $43 billion in March for Seagen, a Bothell, Wash., biotech developing cancer drugs. Closer to home, Pfizer has forged separate drug development partnerships with company creation firm Flagship Pioneering of Cambridge and the Boston biotech Ginkgo Bioworks.

As the scientific understanding of mutations and disease-fighting approaches proliferates, the old model of keeping drug discovery within one company “is not sustainable,” Bourla told his audience at the Boston Harbor Hotel. Companies will need to form partnerships with research institutions and other biopharmaceutical firms. “What you have to do is enable an ecosystem,” he said.
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^^^From Sept. 27
www.bostonglobe.com

Pfizer chief, visiting Boston, sees âscientific renaissanceâ over coming decade - The Boston Globe

Albert Bourla said artificial intelligence has the potential to accelerate everything from scanning for drug targets to enrolling patients in clinical trials.
www.bostonglobe.com www.bostonglobe.com

The mRNA vaccines are custom-made for every person. They use proteins in the pancreatic tumors, called neoantigens, to alert the immune system that the cancer cells are foreign. In this way, the mRNA vaccine trains the body to protect itself against cancer cells.
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https://www.mskcc.org/news/can-mrna...-msk-clinical-researchers-are-trying-find-out

^^^ This description is from a successful clinical trial at Sloan Kettering in NYC. The bolding underscores how labor-intensive customized treatments will be, in contrast to a one vaccine fits all model.
 
www.bostonglobe.com

ARPA-H director, visiting Cambridge hub, sees the agency spawning health care âmoon shotsâ - The Boston Globe

The Advanced Research Projects Agency for Health opened its hub in Kendall Square Thursday, and Renee Wegrzyn, the head of the new federal agency, has high hopes for it.
www.bostonglobe.com www.bostonglobe.com

As the Advanced Research Projects Agency for Health opened its hub in Kendall Square on Thursday, the head of the new federal agency said she was confident it will spawn transformative “moon shots” to cure diseases and improve health — even if it’s too soon to say exactly what they might be.

Renee Wegrzyn, the inaugural director of ARPA-H, likened her agency’s dynamic nature — and the unpredictable course of its big-swing programs — to that of the Defense Advanced Research Projects Agency [DARPA], which famously developed the precursor to the internet and other breakthrough discoveries over many decades.
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The agency’s local office is on the third floor of the Cambridge Innovation Center, a high-tech and life sciences incubator [@ One Broadway]. It will initially employ 20 to 25 people, including workers for a contractor, VentureWell.
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Known as the agency’s “investor catalyst hub,” the office aims to spur technological breakthroughs by teaming federal research programs with private investment. One big difference from DARPA, which turns over its promising discoveries to the Pentagon for advance funding, ARPA-H — with a budget of $2.5 billion through 2025 — will rely on financing by private investors to bring technologies to market, she said.
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ARPA-H HQ is in Washington. A second hub, located in Dallas, focusses on patient care. The cited $2.5 billion is the budget request for the Federal government's fiscal year 2024, which began October 1, 2023. Without getting into the weeds, the "through 2025" appears to be a Globe reporting error.
 
stellarfun said:
www.bostonglobe.com

ARPA-H director, visiting Cambridge hub, sees the agency spawning health care âmoon shotsâ - The Boston Globe

The Advanced Research Projects Agency for Health opened its hub in Kendall Square Thursday, and Renee Wegrzyn, the head of the new federal agency, has high hopes for it.
www.bostonglobe.com www.bostonglobe.com
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A great asset to have in our neck of the woods. It will be interesting to see if they expand beyond that small space (which was stood up really quickly after the initial announcement of the Cambridge location). While the work itself is no doubt distributed, it would seem ideal for them to have their own space to host things. We shall see.
 
Novo Nordisk will focus more heavily on growing its U.S. presence, which will come at the expense of the E.U. unless European regulators initiate some reforms, CEO Lars Fruergaard Jørgensen told the Financial Times. Much of the company’s research is now happening in Boston, he said, and that will likely only grow if the E.U. follows through with its pending policy that would decrease market exclusivity for drugmakers.
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This appeared in Stat, a daily medical/health/pharmaceutical newsletter this morning.

Novo Nordisk is the Danish drug company that developed Ozempic and Wegovy.

If you are unfamiliar with these two drugs, see:
https://www.cnbc.com/2023/10/10/oze... Nordisk has,two products: Ozempic and Wegovy.
 
Now hear this. Now hear this.

WeWork has filed for bankruptcy.

That is all. Carry on.

From the NY Times
WeWork’s stock has fallen more than 98 percent since the start of the year, and the company was valued at less than $45 million as of Friday. At its peak, in January 2019, the company was worth around $47 billion.
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awood91 said:
www.bisnow.com

MSCI: Boston CBD Sees Largest Drop In Commercial Property Prices Of Any Global City

Boston's central business district saw a 30.4% decrease in commercial property prices over the course of last year, according to a new report from MSCI.
www.bisnow.com www.bisnow.com
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I would be really careful about reading too much into this analysis. Boston commercial property prices dropped a lot based on a very small number of transactions. Around the country commercial property owners (and their commercial lenders) are desperately trying to prevent transactions from happening to avoid the obvious losses that are pending.

We just had some office buildings that had to be sold; where as property owners in other cities managed to hold off the inevitable.
 
I don't think I saw this posted anywhere yet on aB. For some reason it's not behind a paywall, either, so hopefully all can read. It's a pretty good deep dive by a national paper on a very Boston metro area question.


Few highlights, some of which are eye-popping:

"Yet half a mile away, another shiny building on the water is looking for a major tenant. Complete with 12 floors of lab and office space, a ground-floor restaurant, a 12,000 square foot roof deck and a lobby decked in blue and purple hues, the Seaport Science Center dubs itself “a visionary campus to unlock innovation.” Construction wrapped up almost a year ago.

The building is 100 percent available, according to Cushman & Wakefield."


This is 601 Congress, or the old Hancock HQ in seaport that underwent an extensive retrofit, including a stunning roof deck and multi-story glass common area


"Yet massive spaces out in the suburbs may take even longer to draw interest, local experts say. Take Watertown, a city about seven miles west of Boston that secured major life sciences projects early in the pandemic.

Half of the 1.6 million square feet of lab space that debuted last year is still available, according to Cushman & Wakefield. Roughly a third of that is at Watertown Exploratory Labs, a massive campus purchased by Spear Street Capital in 2020.

The real estate investment company planned to renovate and add to the building, turning it into a state-of-the-art complex with solar panels atop the parking garage and a revamped green space. It would be just the latest of Watertown’s growing life sciences centers."

With more biotechs running with leaner teams, outsourcing more of their R&D and adapting to remote work, overall space requirements are absolutely going to continue to fall, or at best stagnate. Even in the heart of Kendall there's a boatload of existing capacity (both primary and subleases) and there's more prime lab space coming online, with companies like Moderna moving out of high priced mid-tier quality buildings, which will be hitting the market several hundred thousand square feet at a time. I expect consolidation back into Cambridge with a few folks making risky bets in the suburbs left holding their shirts. Also curious to see whether permitted or proposed buildings in good-but-not-great parts of Boston get underway in the coming 6 months...it'll be an interesting couple of years and a GREAT environment if you're one of the small number of companies looking to expand or find new space.
 
www.bostonglobe.com

The Boston area built a ton of lab space. Now many of those buildings are opening empty. - The Boston Globe

The region's supply of life science real estate exploded just as the once-booming industry hit a slow patch. Now what?
www.bostonglobe.com www.bostonglobe.com

Now many of those buildings are nearing completion, and opening empty, into a very different world for the life-science industry. Investment has slowed. Cuts are more common than hiring sprees. And there’s more lab space on the market than there has been in decades — a costly reminder that economic forces often move faster than construction timelines.

“A lot of new construction is going to have a very, very hard time getting leased,” said Mark Winters, a veteran life-science real estate expert and vice chairman with the brokerage Newmark.

In just two years, the amount of lab space in Greater Boston has ballooned by 57 percent, according to research from real estate brokerage firm Colliers, with nearly 18 million square feet of new space opening from the Seaport to Worcester. For comparison, that is nine times as much as opened between 2019 and 2021.
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In 2021, biopharma companies in Massachusetts received a staggering $13.7 billion in venture capital funding, up 70 percent from 2020, according to the Massachusetts Biotechnology Council, an industry trade group.

Even developers who’d never built lab space before were eager to get into the game, and before long, warehouses, old office buildings, even shopping malls were being proposed for redevelopment into lab space. Communities like Somerville, Watertown, and Waltham, eager to build their tax base, happily signed off. Somerville alone approved more than 600,000 square feet of life-science projects, and has 2 million more square feet due to come online within the next year or so.
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But things have changed. Venture capital funding for biopharma has dropped by nearly $6 billion — around 44 percent — since 2021. Companies that used to lease more space than they’d need in anticipation of future growth are now holding their purse strings tighter. Tenants have more options, and need less space than just a few years ago.

It’s not just Boston facing a slowdown. Lab vacancy rates have also surged in other major life-science markets such as San Francisco and Seattle.

With so much supply out there, competition for new tenants is and will stay fierce.

“Over the long haul, there will be growth in the market to absorb space,” Myers of Colliers said. “But it will take time.”
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Given these market conditions, doubt there will be a new lab building at Bulfinch Crossing / Haymarket anytime soon, if ever.
 
Breakthrough Properties, the same joint venture involving Tishman-Speyer who is developing 232 A Street in Fort Point, did a full gut lab conversion on the One Canal Park building on First St. in East Cambridge (next to Cambridgeside). This is branded as a Breakthrough lab facility. We didn't bother to make a thread for it...because, ho hum, more labs.

Nonetheless, apparently they have recently leased space in One Canal to a trio of biotechs:

Breakthrough Properties to Welcome Three Mission-Driven Biotech Companies to One Canal Development in the Heart of Cambridge

www.morningstar.com www.morningstar.com

Here's their project page for One Canal:

One Canal by Breakthrough – Breakthrough Properties

One Canal By Breakthrough sits along the Lechmere Canal and has exquisite views of the Canal Park, Boston skyline and the Charles River.
btprop.com
 
SAP is taking 25,000 sf. at 60 State Street downtown. This represents an expansion and a move to city center: they have 14ksf in Watertown, and will be sunsetting that and moving it to the 60 State location:

With the move, SAP LeanIX is “accommodating the company’s growth as well as supporting increased collaboration at the office,” SAP said in a statement. “In addition, SAP LeanIX aims to attract even more top talent based in Boston.”
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www.bostonglobe.com

EV charging company picks Boston for East Coast headquarters - The Boston Globe

The chief executive of EVPassport said he has already hired 20 people for the 4,000-square-foot office, which is expected to open in September, and plans to add another 15 people to the local team.
www.bostonglobe.com www.bostonglobe.com

…..A California-based supplier of electric-vehicle chargers has decided to park itself in Boston, picking a Financial District location for its East Coast headquarters.

EVPassport chief executive Hooman Shahidi will be based out of the new Boston office, as will the company’s product, sales, and engineering functions. Shahidi, who grew up in Dover, said he has already hired 20 people for the 4,000-square-foot office, which is expected to open in September, and plans to add another 15 people to the local team. (He declined to disclose the address.)…..
 
New 10-yr, 25-ksf lease at 131 Dartmouth for marketing agency Gupta Media:

bostonrealestatetimes.com

Gupta Media Doubles Office Footprint in Boston - Boston Real Estate Times

Boston– Gupta Media announced the signing of a 10-year lease at 131 Dartmouth Street in the Back Bay. This strategic move will more than double Gupta Media’s current footprint, expanding […]
bostonrealestatetimes.com

131-Dartmouth-St.png
 
I've always really liked this building. I remember taking pics of it while it was u/c in 1999. It kind of reminds me of a ship.
 
Bain Capital renews and expands lease at 200 Clarendon (aka Hancock Tower):
They are going from 316ksf to 378ksf.

Private equity giant Bain Capital has decided to keep its headquarters at 200 Clarendon in Back Bay, signing one of the largest office leases in Greater Boston since the pandemic, Boston Business Journal reported.
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bostonrealestatetimes.com

Bain Capital to Keep it Back Bay Headquarters, Signs One of the Largest Office Leases Since the Pandemic, Reports BBJ - Boston Real Estate Times

BOSTON—Private equity giant Bain Capital has decided to keep its headquarters at 200 Clarendon in Back Bay, signing one of the largest office leases in Greater Boston since the pandemic, […]
bostonrealestatetimes.com bostonrealestatetimes.com
 
bigpicture7 said:
Bain Capital renews and expands lease at 200 Clarendon (aka Hancock Tower):
They are going from 316ksf to 378ksf.



bostonrealestatetimes.com

Bain Capital to Keep it Back Bay Headquarters, Signs One of the Largest Office Leases Since the Pandemic, Reports BBJ - Boston Real Estate Times

BOSTON—Private equity giant Bain Capital has decided to keep its headquarters at 200 Clarendon in Back Bay, signing one of the largest office leases in Greater Boston since the pandemic, […]
bostonrealestatetimes.com bostonrealestatetimes.com
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A reminder. Bain Capital is separate from Bain & Co.; the latter will be occupying the new building that is replacing the demolished Shreve, Crump, and Low building.
 
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