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INNOVATION ECONOMY

The suburbs are cheaper, but they don’t have what Kendall Square has for biotechs: serendipity

Kendall Square
Kendall SquareDavid L. Ryan/File 2019/Globe Staff

You know Kendall Square’s office rents have gotten stratospheric when a CEO compares the neighborhood with Madison Avenue in New York, Rue Saint-Honoré in Paris, and Via della Spiga in Milan.

But its brand is all about bleeding-edge science — not high-end shopping. There’s no denser collection of biotech startups, big pharma companies, and venture capital firms anywhere else in the United States, and perhaps on the planet. They’re clustered on either edge of the Massachusetts Institute of Technology campus, and along Main Street heading into Cambridge’s Central Square. And they’re all paying the highest rents in New England: almost $100 per square foot for lab space and $92 per square foot for offices, according to the real estate brokerage CBRE. Both numbers are records.

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What makes it worth paying such high rents, when you can be in the suburbs for half the price, or even in other parts of Cambridge for 60 or 70 percent of the cost of Kendall Square? I posed that question to the denizens of the neighborhood — as well as to some who have decamped for more affordable neighborhoods.

Everyone started by talking about a dynamic that’s tough to put a price tag on: serendipitous interactions with people at other companies.

“There are countless interactions between biotech entrepreneurs, pharma leaders, and investors that happen virtually every day,” says John Maraganore, chief executive of the publicly traded biotech Alnylam Pharmaceuticals. “I walk to MIT, the Broad Institute, the Whitehead, all the time. I also walk to my partners over at Sanofi and Novartis, and also to potential partners all around the square.”

In biotech, “partner” typically refers to a bigger company that is funding a research program at a smaller company, with the hope that a marketable drug will emerge.

Even when his company was a mile down the river, close to Cambridgeport, there was a noticeable difference, Maraganore says: “You just don’t run into as many people, and one of the reasons is that you generally need to be in your car to get around.”

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Unplanned conversations aren’t only about catching up with old friends or buttering up somebody who might invest in your startup. As Anna Protopapas explains, just having breakfast at Luna Cafe or Darwin’s “inevitably leads to finding the super-specialized expert you might have been looking for to solve a scientific problem, getting a referral on a great candidate for an open position,” or “gaining some critical competitive intelligence.” Protopapas is the CEO of Mersana Therapeutics, which is developing drugs to treat ovarian cancer, and like Maraganore she has spent much of her career working in Kendall Square.

Venture capitalists like the ability to keep a close eye on the companies they’ve put money into and take lots of meetings with scientists and entrepreneurs who might be on the verge of starting the next Biogen or Alnylam.

Jason Pontin, a partner at Social Impact Capital, offers a concrete example: one of his recent investments, Trilogy Sciences, a startup that is building new technology for drug design. Pontin and Trilogy CEO Neil Dhawan decided to move the fledgling startup from Watertown to Kendall Square. “We wanted to be closer to talent who would work at the company,” to scientists who could offer guidance, and to other investors who may provide money in the future, Pontin explains. “We investors don’t want to schlep out to Watertown for the companies we’ve invested in, and the talent and advisers don’t want to work there.”

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Sorry, Watertown.

Every week, daytime conferences and evening networking events bring people together from different companies, notes Pearl Freier, president of the recruiting firm Cambridge BioPartners.

An address in Cambridge carries cachet, notes Brian Gallagher, a venture capitalist. “I’ve been in board meetings where someone says, ‘I don’t think we should be building the most preeminent company in this space in Waltham,’ ” says Gallagher, a partner at the investment firm Abingworth LLP. “Whether that’s legit or not is a question.”

But perhaps Kendall Square’s biggest draw is that it’s easy for MIT scientists to walk over to the offices of a company they’ve helped start, to keep tabs on the progress and to offer advice. (It’s also an easy MBTA or Uber ride from Massachusetts General Hospital and Harvard, two other places where scientist-entrepreneurs hang out.)

“Especially in their early years, the close relationship to the founding labs is essential” for young biotech businesses trying to turn academic research into marketable products, notes Johannes Fruehauf, executive director of LabCentral, a lab-and-office complex in Kendall Square.

“I completely get it why companies want to start there, and why they tend to stay there once they get started,” says Arthur Tzianabos, a biotech industry veteran who has worked in Kendall Square and Lexington, and now runs a Bedford company, Homology Medicines.

When Tzianabos was thinking through his current company’s real estate quandary, “it was about do I want to spend money on bricks and mortar, or innovation.” At about $40 per square foot, his rent in Bedford is roughly half of what he would have paid in Cambridge. The company is working on a gene therapy that would treat phenylketonuria, a hereditary metabolic disorder.

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One downside of Kendall Square, he says, is that “everybody is always looking to take your talent.” Another one that Tzianabos and others mention: increasingly knotty traffic.

But being there plugs you into a powerful information flow. Once a company is well-established, or an individual has built a personal network over a couple decades, like Tzianabos, they may not need to be there quite as much — though Tzianabos says that he does go to the square for meetings about once a week.

“Even with all of the modern communications available to us all, this is still a face-to-face and human-to-human business built on trust,” says Michael Bonney, a former CEO who serves on several biotech boards. “For the very early stage companies and their owners, this localization can be hard to quantify,” but it has a “meaningfully positive impact on the probability of success,” he adds.

And these days, that comes with a high price tag.


Scott Kirsner can be reached at kirsner@pobox.com.