Forward leasing: Newest life science real estate trend - by Bill Kane

Bill Kane, BioMed Realty

Boston-Cambridge was recently named the top biopharma cluster in America by Genetic Engineering & Biotechnology News – and has long been considered the life science capital of the U.S. and, arguably, the world. In 2015 alone, venture capital investments in the Boston-Cambridge area hit $2 billion and biotech, tech, healthcare and pharmaceutical companies are flocking to this innovation community to be among other groundbreaking companies, collaborating and creating synergies. The increased activity and investment in biotech, along with close proximity to research talent from MIT and Harvard, are the primary drivers of Boston-Cambridge sustained preeminence as a life science real estate market. Ninety-eight percent of laboratory space in Boston-Cambridge is leased by some of the most innovative and successful companies, including Genzyme, Alnylam, AbbVie, Biogen and Vertex, to name but a few. As the demand for space here is rising to unprecedented levels, companies are securing their growth needs by signing long-term leases several years in advance of when they plan to move into the space or must renew existing leases.

For companies big and small, a significant amount of planning, resources and costs are associated with moving, making lease extensions and longer term lease options incredibly attractive and advantageous. Relocating may also present an additional challenge for companies whose lab trials and research are underway and can be compromised. Long term leases help companies feel more settled and stable, and minimize the risks of securing a company’s spot in a vibrant, amenity-rich community that fosters collaboration with other innovative companies, proximity to investors and the ability to prove relevancy and status. By “forward leasing,” companies secure space with cost, stability and demand advantages, especially in markets like Boston-Cambridge where demand for quality space continues to outpace supply. This trend has emerged in the Boston-Cambridge area over the last year with two significant leases to premier life science organizations – a new lease and a lease renewal. Alnylam, a global leader in RNAi therapeutics, signed a lease at 675 West Kendall three years in advance of their move-in in order to ensure their presence in the incomparable Kendall Sq. life science cluster. At the Center for Life Science | Boston, Dana-Farber Cancer Institute, the Dana-Farber Cancer Institute leased the space three years in advance of their commencement term date in order to continue their transformational oncology research in the same building with Harvard Medical School, Children’s Hospital and Beth Israel Deaconess Hospital. As the forward leasing trend continues, real estate companies must plan for the future and adapt in the following ways:

• Plan research facilities efficiently and further in advance, providing adaptable laboratory and office space where small and large tenants alike can grow as their needs evolve.

• Allocate the correct resources in trusted contractors, brokers and consultants, who can help make the transitions more efficient and effective between tenants, thereby ensuring that the most suitable tenant moves into the right space at the right time.

• Keep the lines of communication open with prospective tenants to let them know that forward leasing is an opportunity to ensure that their most valuable asset – their employees – have the best chance for professional success and fulfillment.

• Understand what areas, amenities and collaborative environments are best suited for the market and promote them accordingly to current and prospective tenants.

The increased level of capital inflow, combined with increasingly limited available space, are pushing forward leasing to the forefront and becoming a common occurrence in this growing, ever-changing market. By focusing on, and adapting to, the unique needs of our tenants, the life science real estate will continue to grow with the industry we serve.

Bill Kane is senior vice president of East Coast leasing at BioMed Realty, Boston.