As the global economy grapples with the COVID-19 pandemic, the city of Boston, and along with it the commercial real estate market, has ground to a halt. The month of March has been effectively on hold. Unless deals are expiration-driven, many tenants are taking a wait-and-see approach. Public companies have seen their valuations cut substantially, and VC firms are less eager to invest in startups, which is slowing demand. Recession appears to be a formality at this point, with the question ultimately being how bad it will be. However, these are not normal economic conditions; the shutdowns are a deliberate, coordinated effort to reduce economic activity to save lives. As James Bullard, president and CEO of the St. Louis Federal Reserve, has noted, our typical thought process about business cycles does not apply to today's circumstances.
Time will tell how all this affects the Boston office and lab market. At the start of 2020, venture capitalists were spending at a record-breaking pace, following back-to-back years of all-time highs. Rents were also rising at an accelerating pace, demand was strong, and construction projects were moving forward. Boston’s economy is better diversified today than at any point in its history. It is full of innovative and creative firms. We are a global center for healthcare and education. That hasn’t changed, and will not.
Cambridge-based bioscience firms are at the forefront of finding a vaccine and treatment for the COVID-19 virus. Moderna, Alnylam, Takeda, and Biogen are just a few of the local companies working on COVID-19-related therapies, and may soon receive a boost from the federal stimulus bill approved in late March. Before the virus struck, the Cambridge market had kicked off the year with more than 125,000 SF of absorption across all three submarkets. New development projects have been proposed, and while stalled at the time of this writing, underway projects across the city will drive more absorption in the quarters ahead.
Boston's suburban market started the year off with more than 400,000 SF of positive absorption. Companies in the suburbs with strong medical device and diagnostics expertise are being tapped to help battle the COVID-19 virus. PerkinElmer, Thermo Fisher Scientific, Quest Diagnostics, and Hologic are just a few of those making headlines in the fight against the virus. Moderna, in the midst of a human trial for its virus vaccine, has its manufacturing operations in the suburbs.