An improving economy is shifting concerns from whether growth in area biotechnology operations will resume to a more pronounced concern over being able to accommodate space needs in Cambridge, amid a constrained amount of supply.

Absorption of biotechnology research-focused real estate has turned positive since early 2010, as global recessionary forces had induced a prolonged period of slight negative absorption starting in the middle of 2008. With the recession causing a 1.4 percent decrease in occupancy levels, those levels have already risen 2.7 percent from first-quarter 2010 lows, as the region’s larger biotechnology organizations continue their program of growth, and mid-sized and even early-stage companies have grown with better access to capital and improving confidence from various equity sources.

Just as current statistics reflect improving demand, the theoretical value proposition of Cambridge and the region as a leading global center for biotechnology research operations continues to strengthen. The region is one of the world’s few places where such a diverse mix of biotech expertise – from educational or entry level to seasoned researchers and biotechnology-trained managers and executives – can be found. This is critical to large organizations, which have the ability to rapidly deploy capital toward desired research activities, as well as earlier stage companies that would be otherwise challenged in relocating the needed talent to a location without critical mass.

As the larger biotechnology organizations continued to grow and execute their strategy throughout the most recent recession, a resurgence of earlier stage biotechnology organizations is set to create intense demand for a variety of biotechnology real estate in the near term.

Today, laboratory vacancy is 16.2 percent in East Cambridge, the region’s laboratory nucleus. Though not a particularly low vacancy rate, a closer look at the specifics reveals a highly possible near-term scenario where tenants large and small get locked out of this global biotech center.

Almost half of the vacant space is at 650 East Kendall St., a 311,000-square-foot, state-of-the-art facility completed last year. A large transaction or multiple transactions filling this facility would result in a 9 percent vacancy rate, and would also eliminate all larger Class A choices over 50,000 square feet. At that point, just four quarters of demand at the average rate of 70,000 square feet per quarter (average post tech-bust demand) would result in a 2.5 percent vacancy rate.

With no construction currently under way, prospective and/or growing tenants would have to wait two to three years for new construction or office conversions to provide them with new locations or growth options.

Suburban Shortage?

While less dramatic, the suburbs may also be in danger of facing a space shortage, particularly in the most heavily desired areas. While the Cambridge area drives the world’s interest in the region as a biotechnology center, the suburbs have long served as a location of choice for many of the region’s biotechnology operations, including those for AstraZeneca, Genzyme and Shire Pharmaceuticals.

Tenants over the past three quarters have absorbed 277,000 square feet of suburban laboratory space, having lowered the vacancy rate from 14.9 percent to 12.7 percent. When looking at Framingham, Lexington and Waltham, the 2.8 million square feet of Laboratory space in the towns constitutes 60 percent of the suburban laboratory market, and is 7.5 percent vacant. Additionally, Class A space, the type that is being increasingly demanded by biotechnology groups looking to impress top talent with attractive work surroundings, is only 1.9 percent vacant in these towns.

The transition from stagnation to growth appears to have begun, and many of the region’s laboratory space users may be challenged to find space sufficient to execute their strategies in 2011 and 2012

Brendan Carroll is the senior vice president of research for Richards Barry Joyce & Partners, a full-service commercial real estate firm based in Boston, www.rbjrealestate.com