Key Takeaways
- Tenants will have plenty of options to choose from as vacancies rise.
- Oversupply is major downside risk of developers across the metro.
- VC fundraising took a step forward in the first half of the year.
The life sciences total availability rate in the Boston metro rose to 10% in the second quarter. A little under two years ago, less than 1% of space here was available, but now availabilities have reached double digits for the first time since 2014. No corner of the metro has been untouched as vacancies have expanded in Cambridge, Boston and Suburban submarkets. Some tenants have offered space for sublease or given it back to landlords. Both actions weigh on net absorption. Weakening fundamentals are primarily caused by the large numbers of buildings newly on line at less than 100% occupancy. With millions of uncommitted square feet of underway space still in the pipeline, vacancies appear poised to grow further. Tenants in the market have plenty of options.
Venture capital flows improved during the first half of 2023. In the first six months of the year, Massachusetts-based biotechnology firms brought in about $3.9 billion in venture capital and other pre-IPO funds, a 23% jump from the prior six-month period. And the average round was 36% higher than it was in the second half of 2022. Although volume is well below the (unsustainable) peak of 2021, if the pace of VC funds invested year-to-date is sustained, this could be the fourth0best year on record and still potentially generate demand for space. Biotechnology stock prices are generally up from their 2022 trough, but value gains this year have been muted and could continue to weigh on new IPOs.
