Fire trucks and spring beds and telephones Â… oh my! While perhaps not nearly as cohesive as lions, tigers, and bears, there exists a common link between the three inanimate items: Each can find its birthplace right here in the Hub.
Without a doubt, Boston’s inventiveness still lingers. One-time Bostonians Alexander Graham Bell and Thomas Edison have been replaced by the engineers and designers at EMC and IBM. Scientists at Genzyme and Biogen Idec carry on the legacies of early Bostonians, Zabdiel Boylston and Cotton Mather, who were among the first to experiment in smallpox inoculation. Today’s whiz-kids at Harvard and MIT follow in the entrepreneurial footsteps of Harvard’s own (dropout) Bill Gates. With the Hub’s longstanding tradition of technological innovation, intellectual stimulation, and entrepreneurial spirit, it’s no wonder that the technology industry has been at the heart of Boston’s economy since the Colonial era.
Today is no different. The beginning of the decade ushered in an era of rapid growth in the life sciences and high-tech sectors – growth that is expected to continue as these industries form the centerpiece of the future of Boston’s economy. Based on the forecasted employment generation from these key sectors, The Concord Group, a real estate development consulting firm with offices in Boston, projects demand for an additional 2.2 million to 2.5 million square feet of new office space and 700,000 to 1 million square feet of new laboratory space in the Boston metropolitan area through 2012.
Much like legumes and rhizobia (leave the details to the lab experts in Kendall Square), Boston and the technology industry need each other. In order to thrive and sustain growth, industries focused on technology and innovation require an intellectually stimulating and supportive environment. The area’s access to unparalleled intellectual capital offered by top universities and think tanks, the presence of attractive and established urban and suburban office space and the high concentration of venture capital firms within the area, provide a foundation for the Hub to foster tech firms of all stages.
If you walk through the facilities of Hub-based biotech and high-tech firms, you’re likely to find something very different than you would roaming the halls of Ropes & Gray or the State Street Corp. – a decidedly younger employee base. The presence of bright young minds forms the core of these emerging and established tech companies, and means access to and relationships with top-notch institutions will be an important factor in the growth of these firms.
Additionally, the duality of the Hub’s primary technology employment cores appeals to firms either looking for an attractive urban location, or a cheaper suburban office/laboratory space. The established biotech and high-tech urban office nodes such Kendall Square and Longwood Medical Area help firms attract younger professionals who prefer to live and work closer to the action rather than in the suburbs. Boston/Cambridge offers companies immediate access to venture capital firms that can propel a company from start-up to major player. On the flipside, firms that would rather pour money into R&D or other investments instead of higher-rent urban rents and those with demands for space beyond what Kendall Square offers can offer easily retreat to suburban office nodes equipped with the necessary price, space and technologies. This variety of office space options is another factor that separates the Hub from other competing tech centers in the United States.
Finally, as an added sign of the growth of the global economy, Boston’s proximity to Europe has become an important factor. Such was the case for pharmaceutical giant, Novartis AG, which moved its worldwide research headquarters from Switzerland to Cambridge in 2003, infusing the area with approximately 1,500 new jobs.
Technology-sector jobs offer salaries well above the national average of $40,690, according to the latest estimates from the Bureau of Labor Statistics. For instance, the average salary in the Boston metropolitan area for someone in the life, physical, or social sciences sector is approximately $72,930, and $85,150 in computer and mathematical sciences sector, each representing an 80 percent and 110 percent increase, respectively, above the national mean salary.
Massachusetts has clearly embraced the technology industries as the future of its economy; recent studies estimate the addition of approximately 45,000 new life sciences and high-tech jobs through 2014, comprising nearly 20 percent of total job growth in that time period. Growth in the local office and laboratory markets are sure to coincide, as evidenced by the increasing development activity poised to change the tech landscape from the suburbs to the heart of Cambridge.
REITs are also looking to cash in on the technology boom. In the fourth quarter of 2007, BioMed Realty Trust delivered a 400,000-square-foot laboratory space in Cambridge. BioMed also paid approximately $700 million in 2006 to acquire and complete the 702,900-square-foot Center for Life Sciences in the Longwood Medical Area. Asking-rents for the remaining top floors at the center have been pushing the $100 per-square-foot threshold.
The vacancy and lease rate figures certainly back up the bets these firms are making. Although the Greater Boston office and lab market lost some steam in the first quarter of 2008, vacancy rates for laboratory space in Cambridge (9.8 percent), Boston (2.9 percent) and the suburban markets (11.8 percent) remain relatively low. The office markets in Cambridge (9.4 percent), Boston (7.1 percent) and the suburban market (14.6 per-cent) are similarly tight, according to a recent report by Jones Lang LaSalle. According to a report by Cresa Partners, lease rates in both office and laboratory space rose considerably from 1Q 2007 to 1Q 2008.
With new office and laboratory projects entering the market in the next two years, vacancy rates are expected to rise and lease rates are expected to flatten, although only temporarily, as strong pre-leasing activity of the new projects, coupled with robust employment growth in the key tech sectors, portend a favorable long-term outlook for the Greater Boston office and lab markets.
In the face of today’s soaring gas prices, a rising credit crunch and overall economic lull, the Alexander Graham Bells and Cotton Mathers of our generation are assuming the roles of as drivers of economic growth as they write the next chapter in the history of technology and innovation.
