Globest.com: The Cambridge-Boston region's commercial real estate market for life science space is very tight. Can you please explain the market dynamics?

William Kane: Cambridge for the first time ever is less than 2% vacant. And while that is sometimes the case in Kendall Square, it is usually not the case across all of Cambridge. When the vacancies are that low and the options are that few, naturally it sets a new set of dynamics that results in forward leasing and a more aggressive leasing velocity.

Globest.com: So you believe forward leasing is paramount when you have such a tight market? Is that right?

William Kane: When the market gets this tight, companies cannot rely on the product becoming available, and so it is an indication that they are assuming that the market will remain tight for a certain period of time. So we look at it with a very high degree of confidence, at least from our perspective in the market, that it is going to remain that tight for that certain period of time…

Globest.com: There is more than 1 million square feet of lab space under construction in Cambridge, but I believe most of it is already spoken for. Is that correct?

William Kane: Pretty much. I think we are talking about 72% of it (1.2 million square feet of space in development) being spoken for.

Globest.com: Are you looking at any new life science development projects at the moment?

William Kane: We always do. We are the second largest taxpayer in Cambridge, we are a large player in this area so usually when new opportunities come online we're definitely involved in all of them. We have a very active acquisitions and developments team that studies these at any point in time.

Globest.com: You have mentioned that there is a rise in amenities among building owners in Cambridge. Are amenities critical for life science companies in this market?

William Kane: What we term as the rise in the amenities is our reaction to what we are seeing as a core competency to our tenants. We are a consumer-driven business. We are always trying to think about how our tenants operate and what makes them successful. And it is very clear that talent is one of their key ingredients. So if there is a competition for talent and they (prospective tenants) are trying to attract the best talent in the world, which they are in Kendall Square, having the most interesting and productive work environments is very important to these companies.

When I refer to amenities, I am not talking about Ping-Pong tables. I am talking about areas where they can collaborate, areas where they can partner, and areas where they can host events. To life science companies, those are amenities. An amenity to a life science user is an accessory that allows them to interact with their peers, to share ideas and collaborate and form new ideas through a collective approach rather than individually. And that is a real important part of how they do business…

There are a couple of new philosophies that we have introduced into our projects. One was called “Universal Flex Labs,” which allows them (tenants) to move walls in a flexible way and lab equipment in a flexible way so that they can change their workspaces to adapt them as they take on new projects without completely gutting or reconstructing their spaces. (Editor's Note: The program was rolled out two years ago at 325 Vassar St. in Cambridge and since then the company has introduced it at all of its new development projects across the United States, including the Sydney Research Campus in Cambridge and at 301 Binney St. in Cambridge, as well as in other markets, including San Diego and San Francisco).

Globest.com: With the dramatic changes that have taken place in the life science sector over the past five years, are you seeing the market constantly evolve where property owners have to be in tune with what tenant needs are and be willing to make investments when necessary?

William Kane: First, they have a desire to perform and prosper in a collaborative-networked environment. Gone are the double-loaded corridors where everyone is sitting in their offices with their doors closed. You will never, ever see that built today… Now you are seeing open, project-oriented environments with lots of visibility, lots of transparency and lots of breakout areas and meeting spaces.

From a science perspective, we are seeing that from the early 90s a movement from more heavier industrial use, requiring more chemicals and heavier types of biologics, to a lighter use (today). The density of lab to office has moved from 70% lab and 30% office (in the 1990s) to today where it now is 60% lab and 40% office and in some cases 50-50. So the users are getting lighter. A lot of times they are getting lighter because of the advent of genomics and genomic research. More users are getting into digital health, bioinformatics and genomic research and they are running models that analyze billions of iterations of therapies and they are finding a more targeted approach to doing research…It's a huge improvement in efficiency and speed when they take that rifle approach instead of the shotgun approach.

William Kane, senior vice president, Boston lead for BioMed Realty

Part 2 of 2

BOSTON—The keys to a successful real estate market that is attractive to the life sciences sector are its proximity to higher education, collaborators as well as a vibrant downtown that appeals to their Millennial workforce.

In part 2 of our exclusive conversation with William Kane, senior vice president, Boston lead for BioMed Realty, he discusses the rise of amenities in the life sciences sector as well as the changes that have taken place in Cambridge that have forced landlords to change strategies and make investments in order to compete.

BioMed Realty has a portfolio of approximately 3 million square feet of laboratory/office space in the Cambridge, Boston markets that are currently 97% occupied.

Globest.com: The Cambridge-Boston region's commercial real estate market for life science space is very tight. Can you please explain the market dynamics?

William Kane: Cambridge for the first time ever is less than 2% vacant. And while that is sometimes the case in Kendall Square, it is usually not the case across all of Cambridge. When the vacancies are that low and the options are that few, naturally it sets a new set of dynamics that results in forward leasing and a more aggressive leasing velocity.

Globest.com: So you believe forward leasing is paramount when you have such a tight market? Is that right?

William Kane: When the market gets this tight, companies cannot rely on the product becoming available, and so it is an indication that they are assuming that the market will remain tight for a certain period of time. So we look at it with a very high degree of confidence, at least from our perspective in the market, that it is going to remain that tight for that certain period of time…

Globest.com: There is more than 1 million square feet of lab space under construction in Cambridge, but I believe most of it is already spoken for. Is that correct?

William Kane: Pretty much. I think we are talking about 72% of it (1.2 million square feet of space in development) being spoken for.

Globest.com: Are you looking at any new life science development projects at the moment?

William Kane: We always do. We are the second largest taxpayer in Cambridge, we are a large player in this area so usually when new opportunities come online we're definitely involved in all of them. We have a very active acquisitions and developments team that studies these at any point in time.

Globest.com: You have mentioned that there is a rise in amenities among building owners in Cambridge. Are amenities critical for life science companies in this market?

William Kane: What we term as the rise in the amenities is our reaction to what we are seeing as a core competency to our tenants. We are a consumer-driven business. We are always trying to think about how our tenants operate and what makes them successful. And it is very clear that talent is one of their key ingredients. So if there is a competition for talent and they (prospective tenants) are trying to attract the best talent in the world, which they are in Kendall Square, having the most interesting and productive work environments is very important to these companies.

When I refer to amenities, I am not talking about Ping-Pong tables. I am talking about areas where they can collaborate, areas where they can partner, and areas where they can host events. To life science companies, those are amenities. An amenity to a life science user is an accessory that allows them to interact with their peers, to share ideas and collaborate and form new ideas through a collective approach rather than individually. And that is a real important part of how they do business…

There are a couple of new philosophies that we have introduced into our projects. One was called “Universal Flex Labs,” which allows them (tenants) to move walls in a flexible way and lab equipment in a flexible way so that they can change their workspaces to adapt them as they take on new projects without completely gutting or reconstructing their spaces. (Editor's Note: The program was rolled out two years ago at 325 Vassar St. in Cambridge and since then the company has introduced it at all of its new development projects across the United States, including the Sydney Research Campus in Cambridge and at 301 Binney St. in Cambridge, as well as in other markets, including San Diego and San Francisco).

Globest.com: With the dramatic changes that have taken place in the life science sector over the past five years, are you seeing the market constantly evolve where property owners have to be in tune with what tenant needs are and be willing to make investments when necessary?

William Kane: First, they have a desire to perform and prosper in a collaborative-networked environment. Gone are the double-loaded corridors where everyone is sitting in their offices with their doors closed. You will never, ever see that built today… Now you are seeing open, project-oriented environments with lots of visibility, lots of transparency and lots of breakout areas and meeting spaces.

From a science perspective, we are seeing that from the early 90s a movement from more heavier industrial use, requiring more chemicals and heavier types of biologics, to a lighter use (today). The density of lab to office has moved from 70% lab and 30% office (in the 1990s) to today where it now is 60% lab and 40% office and in some cases 50-50. So the users are getting lighter. A lot of times they are getting lighter because of the advent of genomics and genomic research. More users are getting into digital health, bioinformatics and genomic research and they are running models that analyze billions of iterations of therapies and they are finding a more targeted approach to doing research…It's a huge improvement in efficiency and speed when they take that rifle approach instead of the shotgun approach.