Bill Kane, BioMed Realty

Kendall Sq., Kendall Sq., Kendall Sq.…the hub of life science innovation has been the study of the global biotech community for almost two decades and, to this day, it continues to impress with its historic growth and prosperity. What used to be acres of sleepy government surplus land aligning the edge of MIT’s campus is now the home of world-renowned research and tech companies competing or collaborating (and sometimes both) in what some tout to be the deepest research cluster in the world. The magic of what locals call the “Kendall effect” is explained by the “bump in factor,” which relates to the countless ideas and relationships that are fostered through haphazard interactions with peers, mentors and world famous inventors each day on the street or in coffee shops.

Looking ahead into 2017 and from a life science real estate perspective, we are witnessing a region with extraordinary growth and companies looking to stay ahead of the leasing demand curve by securing space years in advance. At BioMed Realty, we are entering leasing conversations with tenant reps earlier than ever before, which has caused new leasing trends to emerge that are impacting the process in several interesting ways. The most recent trend is what we call “progressive leasing,” which has taken on three forms: forward leasing, early renewal and pre-leasing with each influencing life science real estate leasing in Kendall Sq. in profound ways.

One of the first indications of progressive leasing that we experienced was an uptick in forward leasing, where companies, seeking space in a supply constrained market, secured leases for high quality space years in advance of its availability in the market. We first saw this occur at our 675 West Kendall property, where a fast growing RNAi-based company leased 295,000 s/f three years in advance of its move-in to fully secure a prominent presence in Kendall Sq. Later in 2015, a Fortune 500 pharmaceutical company forward leased a 6,000 s/f expansion to create an innovation center in our most recent Kendall project at 450 Kendall St. Most recently, another of our large pharmaceutical tenants expanded from its space at 650 Kendall St. into our iconic flagship property at 500 Kendall St. to create a rare disease innovation campus, where they expect to move into early in 2019.

Another version of progressive leasing activity is the recent uptick in early lease renewals. Similar to tenants seeking new space in a tight market, existing tenants are also reacting in a proactive way to secure space and operational predictability. In the past, renewal discussions would normally kick off approximately 12 to 18 months in advance of lease expirations. However, over the last two years, we have witnessed tenants engage landlords and brokers twice as early as a way to ensure that they are not only securing the optimal space they need, but also starting to take the additional steps to explore expansion opportunities to accommodate projected growth needs. The two most recent examples of early renewals occurred at our Rogers St. 320 Bent St. facility (again, another big pharmaceutical) and with an established Harvard-affiliated cancer research institute at our Center for Life Science | Boston facility in the Longwood Medical Center.

The third component of this progressive leasing trend, pre-leasing, has been a positive indicator of sustained leasing and development momentum in Kendall Sq. More than ever, growing life science companies are eager to secure or expand their footprint in this unparalleled innovation hub, to the point where developers and landlords are able to lease space on ground-up construction that is not scheduled to be completed until well into the future. The most recent and high profile announcement of this growing trend was late in 2016, when Akamai Technologies, Inc. unveiled plans for its yet-to-be-built global headquarters in Cambridge, where demolition will take place and a new building will be constructed for an expected 2019 move-in.

While progressive leasing is the most impactful trend in this growing market, we see other types of leasing activities also on the rise. In the continued environment of limited supply in a high-demand commercial real estate market, we are seeing larger companies turn to acquisitions as a way to grow their portfolios and spaces.

One of the top biopharma employers in Massachusetts, Global Japanese giant Takeda Pharmaceutical Co. Ltd., announced early in January that it is acquiring Cambridge-based Ariad Pharmaceuticals, as part of an expansion of what is already a strong presence in this market. We anticipate seeing more companies take this creative approach as they consider the small-to-midsized biotech companies they are looking to acquire, in the same vein as Shire’s recent acquisition of Baxalta.

The desire to be part of the Kendall Square life science community remains as strong as ever for companies of all sizes. As the timing and behavior of tenant demand has been changing, progressive leasing is one way that the life science real estate community will be working smarter and harder to find solutions to meet the growing needs of these innovative companies to support their groundbreaking and live-enhancing work.

Bill Kane, senior vice president of east coast leasing at BioMed Realty, Boston.