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By Jack Rogers | November 17, 2022 at 08:11 AM


In a sure sign that a looming recession is impacting even the most robust markets, Newmark is projecting that gusting macroeconomic headwinds soon may curtail the development of new life science office and lab space in Greater Boston, the largest North American life science hub.

Boston has been rapidly expanding its life science footprint this year, with an estimated 40M SF of proposed or permitted developments in the pipeline. According to Newmark, shifting market fundamentals may result in more than three-quarters of these projects being shelved.

“Macroeconomic headwinds continue to increase and will likely curtail growth in the local laboratory market,” Newmark said, in its Q3 report on Greater Boston’s life science market.

“Despite near-term supply risks, rising interest rates and inflationary pressures are making it difficult for new projects to secure financing. Upwards of 80% of the 40 million square feet of proposed or permitted developments could be curtailed as a result,” the report said, adding that several proposed conversions and purpose-built labs are already on hold “temporarily or permanently.”

Positive net absorption in Greater Boston, which totaled 1M SF in Q3, is being driven by solid preleasing of many newly delivered lab buildings. However, overall vacancies—now 23%–increased at one of the fastest rates in recent history in Q3 due to rising sublease inventories, which now encompass 1.4M SF, Newmark said.

The delivery of a partially leased development known as Southline in the Dorchester submarket contributed more than half of the newly vacant lab space in Greater Boston in Q3. According to Newmark, less than 20% of the space at Southline was preleased.

“With several layoffs reported by local biotech companies, limited IPO activity and more calculated leasing decisions among tenants, the next 12 months will likely continue to trail recent growth trends,” the Newmark report said.

The report suggested that life science growth could consolidate within more established nodes “as landlords, tenants and investors become more risk-averse in the coming quarters.”

Year-to-date, $4.9 billion in office and laboratory assets have traded throughout Greater Boston, with the sale-leaseback of 125 Broadway in East Cambridge representing the largest transaction of the third quarter. Boston Properties acquired the 271K SF property from Biogen for $602.8 million, or $2,225/SF.

Greater Boston’s suburban lab market now encompasses more than 12M SF, with new deliveries driven by conversion projects, including two projects in Waltham, at 21 Hickory Dr. and 880 Winter St.

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