When George Scangos took the helm at biotech giant Biogen in 2010, he took a look around the company's headquarters in the Weston, Massachusetts, suburb of Boston and thought, "What are we doing out here?"
Last year, the company celebrated the return of its headquarters to Cambridge's Kendall Square, one of the capital cities of the biotechnology industry. The neighborhood's 2.5 square miles are home to 130 life sciences companies, according to industry group Massachusetts Biotechnology Council, the densest concentration on the planet.
"There's so much happening here in Kendall Square," Scangos said in an interview outside Biogen's new headquarters on Binney Street. "MIT is a two-minute walk from where we're standing now, Harvard is down the road, Mass General is a five-minute walk in the other direction. You can't go out to lunch or dinner without seeing people you know from those institutions. The level of excitement and interaction and vibrancy is quite amazing."
And as biotech has boomed over the last few years—the Nasdaq biotech index has more than tripled in the last three—so has real estate in Kendall Square.
The neighborhood has been expanding rapidly to keep up. By year end, the capacity of commercial lab space will have increased by 25 percent since 2009, to more than 10 million square feet, according to Pete Abair, director of economic development and global affairs at MassBio.
Vacancy rates are at record lows, while rents have soared. For office space in Kendall Square, rents have doubled in the last decade, to more than $65 per square foot. Lab space is even tighter, with rents topping $71 per square foot on average, while the vacancy rate dropped to 3 percent in the first quarter, according to real estate firm Transwestern.
Space is at such a premium that biotech companies with plans to grow are taking early steps to secure access to space. Alnylam Pharmaceuticals this month negotiated a "right of first offer" arrangement with real estate firm BioMed Realty Trust to occupy the building at 500 Kendall Street that now houses Genzyme—three years from now. It also signed a deal to lease another 295,000 square feet next door in 2018.