In a positive signal {that a} looming recession is impacting even probably the most strong markets, Newmark is projecting that gusting macroeconomic headwinds quickly might curtail the event of latest life science workplace and lab area in Larger Boston, the most important North American life science hub.
Boston has been quickly increasing its life science footprint this yr, with an estimated 40M SF of proposed or permitted developments within the pipeline. In response to Newmark, shifting market fundamentals might lead to greater than three-quarters of those initiatives being shelved.
“Macroeconomic headwinds proceed to extend and can seemingly curtail development within the native laboratory market,” Newmark stated, in its Q3 report on Larger Boston’s life science market.
“Regardless of near-term provide dangers, rising rates of interest and inflationary pressures are making it troublesome for brand new initiatives to safe financing. Upwards of 80% of the 40 million sq. ft of proposed or permitted developments might be curtailed because of this,” the report stated, including that a number of proposed conversions and purpose-built labs are already on maintain “quickly or completely.”
Optimistic internet absorption in Larger Boston, which totaled 1M SF in Q3, is being pushed by stable preleasing of many newly delivered lab buildings. Nonetheless, total vacancies—now 23%–elevated at one of many quickest charges in latest historical past in Q3 resulting from rising sublease inventories, which now embody 1.4M SF, Newmark stated.
The supply of {a partially} leased improvement often known as Southline within the Dorchester submarket contributed greater than half of the newly vacant lab area in Larger Boston in Q3. In response to Newmark, lower than 20% of the area at Southline was preleased.
“With a number of layoffs reported by native biotech firms, restricted IPO exercise and extra calculated leasing selections amongst tenants, the following 12 months will seemingly proceed to path latest development tendencies,” the Newmark report stated.
The report advised that life science development may consolidate inside extra established nodes “as landlords, tenants and buyers grow to be extra risk-averse within the coming quarters.”
12 months-to-date, $4.9 billion in workplace and laboratory property have traded all through Larger Boston, with the sale-leaseback of 125 Broadway in East Cambridge representing the most important transaction of the third quarter. Boston Properties acquired the 271K SF property from Biogen for $602.8 million, or $2,225/SF.
Larger Boston’s suburban lab market now encompasses greater than 12M SF, with new deliveries pushed by conversion initiatives, together with two initiatives in Waltham, at 21 Hickory Dr. and 880 Winter St.
