Best Type of Lab Space for Your Firm Book

321 Commonwealth Rd, Wayland, MA 01778
Phone: 508-655-5626
Web : www.rwholmes.com

Navigating the Greater Boston Suburbs Lab Market:

Determining the Best Lab
Space for Your Company

INTRODUCTION

As more life science companies search for space outside of Kendall Square, Greater
Boston’s landlords are working to keep up with demand by creating opportunities with
lab ready facilities in the suburbs.

With the increase in demand, we wanted to provide a breakdown of what all of the
different options offer and how your company might fit into each one, based on your
specific needs.

The Three Types of Lab Space:
• Build to Suit: Large, stable company looking to design space to their exact needs
• Speculative Lab: Looking for state of the art lab to impress investors and clients
• Existing Building (Lab-Specific or Lab-Ready): Existing buildings can fit a variety of
needs – length of lease term, budget, extent of construction, etc.

It is important to align yourself with a real estate partner who can match your company
strategy to your real estate. Prior to searching for space, speak with a real estate advisor
to understand how costs, timing, hiring/retention, and growth factor into your real
estate decisions.

COMPARING TYPES OF LAB SPACES

TYPE OF PRICING LENGTH OF TENANT IMPROVEMENT IDEAL USER
BUILDING HIGH
BUILD TO HIGH TERM ALLOWANCE

SUIT MEDIUM • WANTS FULL CONTROL OVER THE DESIGN OF THEIR

SPECULATIVE LONG TERM (10+) OWNER WILL COVER A MAJORITY • SPACE/BUILDING
OF BUILD OUT COST STABLE COMPANY THAT CAN COMMIT TO A 10+ YEAR
EXISTING: LEASE
LAB-SPECIFIC (75-100%) HAS 18+ MONTHS BEFORE NEW FACILITY NEEDS TO BE

•

OPERATIONAL

• WANTS START OF THE ART, BRAND NEW SPACE TO

AVERAGE (MIN 5) OWNER WILL COVER SOME BUILD • IMPRESS CLIENTS/INVESTORS
OUT COST HAS 12+ MONTHS BEFORE NEW FACILITY NEEDS TO BE
OPERATIONAL
(VARIES BASED ON TERM) WANTS TO BE IN A BUILDING WITH OTHER LIFE

•

SCIENCE COMPANIES

VARIES - SHORT FLEXIBLE BASED ON LEASE TERM • WANTS TO BE IN A BUILDING WITH OTHER LIFE
TO AVERAGE AND RENTAL RATE
(3-5+) SCIENCE COMPANIES

($0 – TURNKEY) • DOES NOT WANT TO PERFORM EXTENSIVE BUILDOUT

• COMFORTABLE WITH HIGHER MONTHLY RENTAL RATE

EXISTING: FLEXIBLE BASED ON LEASE TERM • WANTS LOW MONTHLY RENTAL RATE
LAB-READY
LOW AVERAGE (MIN 5) AND RENTAL RATE • COMFORTABLE BUILDING THEIR SPACE FROM SCRATCH

($10/SF – TURNKEY) • HAS 6+ MONTHS BEFORE NEW FACILITY NEEDS TO BE

OPERATIONAL

EXISTING: MEDIUM-HIGH SHORTEST NONE – INCUBATOR PROVIDES • NEEDS LESS THAN 5,000 SF
INCUBATOR (VARIES BASED (MONTH TO PRE-BUILT SPACE • STARTING THEIR COMPANY OR OPENING IN A NEW
ON # EMPLOYEES MONTH OR 1
AND SERVICES YOU NONE AREA
YEAR) • WANTS MOVE-IN READY SPACE
NEED) • WANTS IDEA SHARING AND STARTUP COMMUNITY

SUBLET: LOW VARIES DEPENDING • WANTS BELOW MARKET RATE
EXISTING LAB ON REMAINING • WANTS MOVE-IN READY AND DOES NOT HAVE
TERM, BUT
SPECIFIC REQUIREMENTS FOR THEIR SPACE
TYPICALLY UNDER 5 • WANTS SHORT LEASE TERM – MAYBE DUE TO
YEARS
UNKNOWN SHORT-TERM GROWTH

BUILD TO SUIT (BTS)

As more life science companies search for space outside of Kendall Square, Greater
Boston’s landlords are working to keep up with demand by creating opportunities with
lab ready facilities in the suburbs. With the increase in demand, we wanted to provide a
breakdown of what all the different options offer and how your company might fit into
each one, based on your specific needs.

These are large scale, ground up projects that involve months of planning and
negotiation prior to construction commencement. Lab users that go into these types of
projects will typically need to lease a minimum of 50% (usually a minimum of 40-50,000
SF) of the entire project for the developer/landlord to begin the work. Landlords of BTS
projects will also require a lengthy commitment in lease term that typically goes beyond
10 years. An example of a recently completed project is Millipore’s new facility at 200
Summit in Burlington.

BTS lab projects are typically structured so that the landlord/developer is responsible
for delivery of the shell building, grounds, infrastructure, and all common areas but not
including the user’s space. This is where users must either use the landlord/developer’s
construction team or may hire an outside general contractor, architect, and engineer to
build their space out to their specifications at the user’s cost. Landlord’s typically offer a
tenant improvement allowance (TIA) for the user’s build out, which is paid back to the
user once the work is complete and they move in.

In other cases (usually for full building users), BTS leases may be structured so that
the space is delivered in “turnkey” condition before Furniture Fixtures and Equipment
(FF&E) – whereas the landlord/developer is responsible for delivery of the building AND
the user’s space inside of it.

SPECULATIVE LAB DEVELOPMENTS (SPEC)

Spec lab developments are projects that are already underway prior to any
user committing to any of the space. Since the demand for lab ready space is
so high and supply is so low, developers are beginning the process of either
constructing new buildings that have the infrastructure in place (HVAC, power,
clear height, floor load, waste water mitigation, exhaust, etc.) or are taking
older, vacant office buildings and making them lab-ready by adding these
components.

Users that go into these types of projects can expect to have the necessary
infrastructure in place to buildout a facility ranging from about 10,000 SF on up
and can expect to lease this type of space for anywhere between 5 to 10 years
depending on buildout needs. Users going into a spec lab development can
also expect a TIA for their space that will defray the cost of construction, if not
cover the majority of the cost.

Some examples of Spec lab developments include Jumbo Capital’s project
at The Pod on Crosby Drive in Bedford (268,000 SF), Burlington BioCenter
by Gutierrez in Burlington (110,000 SF), Hobb Brooks’ Wyman Street project
in Waltham (225,000 SF), and Greatland’s Revolution Labs project at 1050
Waltham Street in Lexington (174,000 SF).

EXISTING BUILDING: LAB-SPECIFIC OR
LAB-READY

This type has become harder to come by with the increase in demand recently. This is second
generation space that a similar user has vacated. This is the best scenario for both the user and
landlord/owner alike as it saves costs all around.

These types of lab space options allow for maximum flexibility for the end user’s length of term
and are much cheaper than going the route of either BTS or Spec options which include large
construction costs.
Existing lab space can be found in lab-specific buildings, lab-ready buildings, or incubators. Lab-
specific buildings are those built to solely accommodate life science firms. These spaces are
typically built out with most
infrastructure in place. However, there is a premium for most lab-specific buildings – expect
rents in Waltham and Watertown to be around $50-70 NNN at the newest lab buildings. Second
generation lab spaces can be closer to
$30-40 NNN.

Lab-ready buildings are those that have been used for other uses (office or warehouse space),
but the building systems are able to accommodate lab space.. Lab-ready buildings typically
have lower rental rates – usually in the $20-30/SF NNN range. However, there will be significant
construction costs for the buildout and the TIA provided by landlords varies- sometimes as little
as $10/SF. The most basic lab buildouts are around $100/SF. It is important to compare the
final all-in number (annual rent plus construction costs) to see if a lab-ready building is saving
you money. It is also important to ensure your landlord or landlord’s construction company is
experienced with lab buildouts and local code requirements.

EXISTING BUILDING: LAB-SPECIFIC OR
LAB-READY (CONTINUED)

Incubators work similarly to existing lab space as they are already built out and move-in ready.
These incubators provide short term leases and community benefits. However, this comes at a
premium and can become costly depending on the membership you need and the number of
employees you have. Local incubators include LabShares in Newton and ABI Labs in Natick. This
type of space is great for startups who need less than 5,000 SF or a satellite location.

When comparing direct leases versus sublease space, note that most likely no TIA will be
provided in a sublease, but you may be able to lease for below-market rents or shorter lease
terms. For a direct lease, owners will be more willing to provide a TIA with the amount varying
depending on length of term (most requiring at least 5 years).

ABOUT OUR FIRM

R.W. Holmes Realty is the top independent commercial real estate firm in Massachusetts.
We have stayed independent for one sole reason – to best serve our clients. When
there are no shareholders involved with separate agendas, our brokers focus only on
providing their expertise customized to our clients’ exact needs. Being independent
allows our firm to stay agile, adapting quickly to trends we see in the market, providing
new services as clients’ needs change, and acquiring the latest technology or process
improvements that provide the best client experience. We pride ourselves on being
your full service real estate advisor. Staying independent has made us focus heavily on
knowing all the players in our industry to align our clients with the best team for their
real estate needs.

Our brokers have over 260 years of collective industry experience and know the Greater
Boston market intimately. As our clients grow and expand, R.W. Holmes provides
transaction services nationally and internationally, connecting with local market experts
to determine the optimal location, taking into account market dynamics, demographics,
and economic nuances.

Our connections and reputation in the industry are one of our greatest strengths.
To keep our clients interests aligned with their real estate goals, we stay focused on
knowing the local, national, and international players to provide our clients with the best
team to execute their strategy.

SAMPLE OF WHO WE’VE WORKED WITH