A heavyweight New York developer and a deep-pocketed biotech investment firm are teaming up to build a big lab building on First Street in South Boston, the latest sign that this once-gritty section of the city is becoming a magnet for Boston’s booming life-sciences industry.
Office giant Tishman Speyer and Los Angeles venture capital firm Bellco Capital said Tuesday that they’re launching a real estate firm aimed at fast-growing drug makers. The new company’s inaugural project will be an eight-story building near the MBTA’s Broadway Station on the Red Line.
It aims to break ground early next year and open in 2021, putting the project at the front of what will likely be a wave of new life-sciences-oriented development in a neighborhood that real estate specialists say could serve as a much-needed relief valve for crowded Kendall Square.
Tishman Speyer chief executive Rob Speyer said his firm already owns several office buildings in Boston, including the neighboring Channel Center, which is home to State Street Corp. Speyer said the new venture with Bellco — dubbed Breakthrough Properties — was conceived to build science-focused real estate projects in Boston and other biotech hubs.
“We wanted to plant our Breakthrough flag in Boston first,” he said. “Boston is a city that represents the convergence of everything we’re looking for: Incredible universities, deep biotech talent, great housing.”
Kendall Square in Cambridge has for years been considered of one the world’s leading hubs for life sciences — especially biotechnology. It’s home to outposts for most major drug makers, Massachusetts-based biotechs, and an array of research labs and startups. But Kendall is crowded — the vacancy rate for lab space is effectively zero, according to real estate firm Newmark, and most space in buildings under construction is already taken. That has Greater Boston developers pitching other neighborhoods as the next biotech hotspot
Perhaps no place is emerging faster than the West Broadway section of South Boston and neighboring Fort Point, where roughly 1.5 million square feet of life-sciences-oriented office and lab space is in the works within a few blocks along A Street. It’s close to downtown, the Seaport District, South Station, and the Red Line.
It includes the site where General Electric planned to build its headquarters before selling the land earlier this year to longtime Kendall Square developer Alexandria Real Estate Equities for $252 million. Alexandria, with partner National Development, also spent $81 million to buy a parking garage next door. They haven’t yet filed development plans, but will likely pursue life-sciences tenants.
Next door, another heavyweight developer — Related Beal — won a bidding war for a sea of parking lots owned by Procter & Gamble’s Gillette operation, paying $218 million for six-and-a-half acres. Again, no plans have been filed but real estate specialists say Related will probably opt to build at least some lab or life-sciences office space.
Across the street from Tishman Speyer’s site on First Street, Alexandria and another partner are planning a six-story life science building. That project is under review by the Boston Planning & Development Agency and faces pushback from some neighbors concerned about the building’s height.
The site Breakthrough just bought is already permitted; veteran Boston developer Dick Galvin proposed, and won, city approvals for an eight-story, 266,000-square-foot office building there in 2017. That means the new owners can start construction soon, with no lengthy city review.
“We wanted to be able to meet the demand as quickly as possible,” Speyer said.
That speed to market, though, came at a premium.
Breakthrough paid $80 million for the roughly one-acre site, according to Suffolk County property records. That’s more than triple the $25 million that Galvin’s CV Properties and investment firm Ares Management paid under a contract signed before they permitted it for the larger office space, according to a deed filed in April 2018. A spokeswoman for Galvin said he and Ares intended to build the project when they first proposed it, but that the real estate market accelerated so fast they chose to sell instead.
Regardless, Tishman and Bellco see it as a promising place to launch their new venture, which aims to provide full-service space to young and fast-growing drug makers, “so they can focus on curing diseases, not real estate,” as Speyer put it.
It’s a model more life-sciences developers are pursuing. They are building out startup space — such as Alexandria’s new “Launch Labs” venture — and offering services that go beyond simply providing a place to work. In this case, Breakthrough is touting Bellco’s expertise — the firm founded cell therapy firms Kite Pharma, which Gilead Sciences acquired in 2017 for $11.9 billion, and Allogene Therapeutics, which went public last year — as a way to help tenant companies grow fast.
Speyer said Breakthrough is in the market for more sites around Boston, and wants to soon launch projects in other life science hubs around the world.