WALTHAM — Construction workers are laying the foundation for a 145,000-square-foot life sciences lab building on a hill overlooking the tree-lined Cambridge Reservoir. By the end of next year, it is expected to be crammed with scientists developing new drugs.
But for now, the developer of the $200 million project, King Street Properties, doesn’t know what tenants will occupy this future hive of drug discovery that is now just a hole in the ground.
The new three-story building at 828 Winter St., with a four-story underground parking garage, will connect with a fully leased existing building next door in an office park chockablock with biopharmaceutical companies. It is one of several high-profile new Boston-area laboratory complexes being built “on spec,” meaning developers hadn’t signed up tenants before breaking ground. But they are confident there will be robust demand in a market where drug development has been exploding, lab space expanding, and vacancy rates shrinking for more than a decade.
“Speculative construction is the ultimate risky thing,” admitted Stephen D. Lynch, principal in King Street Properties of Cambridge. Especially when it comes to biotech — companies’ space requirements often change rapidly depending on the results of research. “You have to build it and hope they come,” Lynch said. “It’s not for the faint of heart.”
Yet commercial real estate statistics tell a story that shows that it’s not that much of gamble these days. Lab space in Waltham and Lexington, two suburbs hugging Route 128, nearly tripled to 2.8 million square feet from 2004 to 2017. During that same period, the lab vacancy rate plunged from 34.3 percent to 0.7 percent.
In the life sciences hub of Cambridge, lab inventory climbed 58 percent to 10.6 million square feet over that time, while the vacancy rate fell from 21.2 to 2.4 percent.
“It’s the best lab market in the country,” said Brian Fallon, president of development at the Davis Companies in Boston, which recently began construction on another spec lab building, the 223,000-square-foot Alewife Research Center at 35 Cambridgepark Drive next to the Alewife MBTA station in Cambridge. “It’s reflective of the high confidence we have in the market we’re in. We have a Cambridge address, which means a lot to the lab users around the world.”
Biopharmas are prized commercial real estate tenants because they are typically well-funded public companies, or early-stage research companies backed by deep-pocketed venture capital firms. That’s important when the asking rates for lab space leasing range from $40 to $50 a square foot in Waltham, and between $60 and $80 a square foot in Cambridge, according to…