What’s next for Kendall Square?
Let me describe a job that you should never take. A city hires you as its economic development chief. The City Council wants you to persuade 15 or so publicly traded brand-name companies to set up shop and start hiring thousands of people. Best would be a mix of American and European biggies. And it would be fantastic if you could make that happen in, oh, how about five years?
Totally unrealistic. Except that is what happened in Cambridge’s Kendall Square, between 2010 and 2015. The newest neighbor, announced Tuesday, is Royal Philips. The $24 billion Dutch technology company is uprooting its North American research center from Westchester County in New York and transplanting it — with 100 to 200 jobs — to Kendall.
Here’s who has moved in over the last five years, and the challenges these talent-hungry multinationals may create.
2010: Oracle Corp. pays $1 billion for ATG, an MIT spin-out and pioneer of Internet commerce. The following year, Oracle drops another $1 billion to buy another Kendall Square company, Endeca, which made it simple for companies to present complex product catalogs online, and enable users to search through them. The result? An Oracle office in Kendall that contributes to a product called Oracle Commerce.
2011: A senior Walt Disney research executive, Joe Marks, moves back to Boston and sets up a Disney Research outpost in Kendall. The small lab explores topics like machine learning and artificial intelligence, and has relationships with a handful of professors and post-docs. The same year, the chief executive of Biogen, George Scangos, announces the biotech will move its headquarters from Weston to Kendall Square, bringing its executives closer to the company’s research labs.
2012: Amazon, the e-commerce juggernaut, opens a research and engineering office inside the Cambridge Innovation Center. Among the projects the team has worked on is the speech recognition system for Amazon’s Echo, a $199 cylindrical speaker that sits on a desk or countertop, plays music based on spoken commands, and answers questions about weather, sports, or anything else. Also in 2012, Samsung’s venture capital arm sets up its East Coast headquarters in Kendall, and Sarepta Therapeutics, a developer of drugs for muscular dystrophy, relocates to Cambridge from the Seattle area.
2013: A small crew of engineers working on Facebook’s infrastructure technology moves from a shared space near South Station to Kendall. Apple opens an office for a team of speech recognition experts. Johnson & Johnson opens a “Boston Innovation Center” in Kendall to forge partnerships with and supply funding to biopharma startups and academic researchers. Two acquisitions by Twitter lead to a local office for the social media company.
United HealthCare and the Mayo Clinic open Optum Labs, a collaborative effort to leverage “big data” to improve patient care. Shell, the second-biggest company in the world by revenue, opens a technology development office in Kendall. In December, the chief executive of Saudi Aramco comes to Kendall to cut a ribbon at that oil company’s new R&D digs.
2014: The pharmaceutical giant Pfizer, Inc. and tech behemoth Google expand their Kendall offices. Amazon leases enough space for about 800 employees at 101 Main Street, near the Longfellow Bridge. The French pharmaceutical company Ipsen establishes an R&D office next door to Genzyme. After acquiring three local startups, GoDaddy, the Web hosting and domain registration company, sets up a Kendall Square office for about 40 employees.
2015: Baxter International Inc., the global health care company, makes Kendall the primary research center for its Baxalta spin-off, which makes drugs for hemophilia and leukemia. Baxter says it will employ more than 400, some relocated from Europe and California. Pennsylvania-based Lutron Electronics, maker of light fixtures and remote-controlled window shades, leases 5,000 square feet for a new engineering office.
There are three implications of all this activity. First, real estate prices are skyrocketing. Rents in the $70-per-square-foot range — compared to high $50s and low $60s in Boston’s Financial District — are not uncommon, said Jon Frisch of the commercial real estate firm T3 Advisors in Boston. “Definitely loco,” he said.
That is forcing startups to huddle in shared spaces like the Cambridge Innovation Center, or scatter along the Red Line, to Alewife, Downtown Crossing, and the Leather District. Young life-sciences companies are finding cheaper space in Watertown, Lexington, and Waltham, or the Drydock complex in South Boston.
Second, talent. Some of these offices are magnets, pulling people to Massachusetts from other states. Some provide nice first jobs for recent grads. Others may be pulling people out of the startup ecosystem with high salaries and relative job security. Not so nice.
What happens if these big companies cannot fill the job openings they have created? That is not clear. There is a pronounced talent crunch in tech and biotech here, with many candidates choosing from among three or four appealing offers, according to Bruce Rychlik of the Cambridge recruiting firm Park Square Executive Search.
Third, satellite offices are often the first to get iced when recessions arrive, or companies shift strategies and cut costs. Some sites will endure, but others may not.
The last five years in Kendall Square have been nothing short of amazing. If you were an economic development official in Cambridge, I’m not sure what your next five-year plan would look like. The biggest company in the world, Walmart, is not yet represented in the neighborhood. Perhaps a research lab to develop self-driving shopping carts, guided by artificial intelligence that predicts exactly what you need to buy?