Worcester Business Journal

34 Worcester Business Journal | December 23, 2024 | wbjournal.com Boston, the region's prospects haven't been able to escape these trends. ere have been some bright spots, and industry experts still feel the region is well-positioned to capital- ize on the eventual recovery of the sector, but a sizable chunk of allocated life science space created during the boom remains unutilized. Real estate slowdown In 2020, Boston-based King Street Properties pur- chased 45 acres of land for a biolife-focused advanced manufacturing facility in Devens. It invested more than $1 billion in the five-building site, hoping to entice potential tenants with lower cost than those seen closer to Boston and the ability for the quasi state agency MassDevelopment to streamline project approvals. Of the five buildings, three are leased, with Az- zur Cleanrooms on Demand being the first to ink a lease in May 2022, according to a press release from ECONOMIC FORECAST 2023 Real Estate Report: Industrial Waiting for a life sciences recovery BY ERIC CASEY WBJ Managing Editor F ive years ago, Central Massachusetts seemed destined for a life science real estate boom, as developers across the region rushed to gain approvals for new construction in an attempt to keep up with growth. From Devens to Worcester, life science pad sites were being prepared with haste on speculation, as the region's business and political leaders expressed hope the growing local industry could play a role in defeat- ing the COVID-19 pandemic and developing break- through cures for diseases. Fueled by new construction, which was attempting to catch up to unprecedented demand and investment in the midst of the pandemic, vacant life science space has now become a common sight in Massachusetts. External headwinds of higher interest rates, a slowing economy, and simmering geopolitical tensions have impacted expected growth of the space, according to the 2024 U.S. Life Sciences Outlook produced by Texas-based commercial real estate firm CBRE. is is particularly true in Boston and Cam- bridge, where the life science vacancy rate sits at 30% and 18.8%, according to Colliers. Overall, the state's life sciences vacancy rate sits at 24.5%, a stark contrast from the third quarter of 2021 where the rate was hovering just about zero. While both the presence of the industry and vacancy rates are smaller in Central Massachu- setts when compared to the global hub of Greater Life sciences real estate Worcester Route 495 West Total supply (sq. ft) 1,032,215 2,603,039 Directly available (sq. ft) 90,000 189,741 Sublease available (sq. ft) 31,000 62,014 Vacancy 11.7% 9.7% Year-to-date absorption (sq. ft.) -121,000 -61,014 Source: Colliers 2024 Q3 Greater Boston Life Sciences Report Boston-based commercial real estate advisory firm e Stevens Group. Filling the 311,000 square feet of space in phase two of the development has been proven a larger challenge in the years since, with two of the sites remaining un- leased, according to King Street's website. King Street declined to comment for this story. A similar slowdown has happened with new life science construction in Worcester, with projects near Polar Park and at e Reactory biomanufacturing campus frozen in time. e Reactory is a 46-acre campus comprising former Worcester State Hospital land, which was first earmarked for biolife uses in 2016 aer the then Gov. Charlie Baker Administration formed a task force to revitalize the hospital campus. One of the anchors of e Reactory is supposed to be a 90,000-square-foot building from Webster-based de- veloper Galaxy Life Sciences. Today, the site still sits as it did in January 2021, with a concrete slab poured and a small portion of the building's steel structure erected. Galaxy told WBJ in early 2023 it would wait until it finalized tenants before building out e Reactory. Gal- axy directed a WBJ inquiry to Andrew Sherman and Phil DeSimone of Worcester real estate firm Kelleher & Sadowky, who said they continue to field calls from firms interested in the parcels. e Reactory is not ex- clusively earmarked for biomanufacturing, allowing for potential pivots if clients don't end up materializing. Waiting on WuXi Despite some new construction and pad sites that have gone unused, Central Massachusetts is in a better position than the Greater Boston area, said Jeffery Meyers, a research director at the Boston office of Can- ada-based investment management company Colliers. "If you are comparing it to other parts of the Greater Boston area on the supply side, if you're in Worcester, around [Interstate 495], and a lot of those submarkets, the construction pipeline just isn't as scary as it is in places like Somerville or the Seaport," he said. "Vacan- cies in the 495 market went from zero-ish to 1% back in 2021 or 2020 to up to about 10% now. So they're up, but compared to the 24.5% we're seeing across the entire market, that's actually pretty healthy." While other nearby Reactory pads are still idle, one parcel has seen activity: e site of WuXi Biologic's $300-million, 189,500-square-foot biomanufacturing facility. e China-based company's first manufacturing facility in the U.S., WuXi's plans for the site have expanded since it was first proposed for e Re- actory in 2018, fueled by what the company said was increasing demand from its global clients. Aer announcing further expansion plans in January, WuXi paused work at the facility around June. e company did not disclose a rationale for the decision, but the pause coincided with Congress' consideration of the BIOSECURE Act, a bill which sought to block foreign life science firms from accessing federal funds or working with American firms as manufacturing or trial service providers. e bill, which specifically cited WuXi as one of the firms it was targeting, e slowdown in the once-promising industry is impacting facilities across Central Mass., even as the long-term outlook remains positive Despite delays and the potential threat of a federal crackdown on foreign firms in the life science sector, construction is progressing at China-based WuXi Biologic's $300-million biomanufacturing facility in Worcester. PHOTO | ERIC CASEY

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