Saturday, June 22, 2024

A peek at IQHQ construction on Whittemore Avenue in Cambridge on Friday from a path to the Alewife T station. (Photo: Marc Levy)

One of the last areas still rife for development in the Cambridge, the Alewife region is adding lab and office space to a city already known for it.

At the same time, lab space across Greater Boston continue to see rising vacancy rates as demand slows in the life-science industry.

This month the Planning Board okayed a year’s delay on a remaking of the Garage Mall in Harvard Square, which owner Trinity Property Management said is stalled by “volatility in both the capital markets and the office markets”; two sprawling lab projects affecting block-sized parcels are on hold in Somerville’s Davis Square, where that city’s chief assessor said property owners are waiting to see “how the market comes back.” In East Somerville, a project pivoted in September to residential from a lab proposal.

Two of the largest new campuses in Cambridge will come from Boston’s IQHQ and Denver’s Healthpeak Properties. While the latter has yet to apply for building permits after buying hundreds of millions of dollars in real estate around Alewife beginning in 2021, the former is already deep into construction on its Alewife Park development.

Progess continues on IQHQ construction as seen Friday in Cambridge. (Photo: Marc Levy)

“We’re on target,” said IQHQ’s local legal representative, Anthony Galluccio, on Friday. “We’re focusing on two buildings out of five that are are fully permitted and in construction mode.” The first two buildings are expected to come online this year. Final fit-out of the interiors awaits the specifications of tenants, though, and that’s “dependent on the the market.”

Healthpeak’s large-scale buys caused the City of Cambridge to put a moratorium on building permits in the area until zoning requirements could be developed. The new requirements, which apply only to the “Quadrangle” area north of Concord Avenue and west of Alewife Brook Parkway, were finalized last fall.

The city has yet to hear much from Healthpeak since the zoning went into effect, which assistant city manager for community development Iram Farooq said is not uncommon. The new zoning requirements incentivize creating a master plan for the entire development, Farooq said, which may be what Healthpeak is working on.

Healthpeak, also represented by Galluccio, declined to comment on the status of its developments.

Slowing, not stopping

Despite the waning demand for commercial lab space, Farooq is sanguine about the strength of Cambridge, in particular, as a “desired location” for lab tenants.

“Developers are not stopping – we’re seeing them slow down a little, but they are optimistic,” Farooq said. “I would say the region continues to have really strong attention.”

In fact, Farooq sees one potential benefit to a cooling market: Smaller companies and startups may have opportunities to sublease commercial space more cheaply.

“Before the slowdown, the things that would keep me awake at night was not just housing affordability, but the affordability for our startups,” Farooq said.

Doug Brown, who worked on the new zoning regulations in the city’s Alewife Working Group, said it’s hard to tell whether Cambridge will be affected by the reduced demand in the same way neighboring communities such as Watertown have.

“Just over the border in Watertown, there’s many buildings that have just gone up, some of which are completely empty,” Brown said.

Mike Nakagawa, who also served on the working group, said he expects Cambridge to remain a popular commercial destination.

“I’ve heard that the vacancies and the demand is slowing, but I think it may be more of a pause,” Nakagawa said. “Cambridge has their academic institutions and a lot of innovation – that will encourage people.”

A more balanced market

A rendering of The Davis Cos.’ 101 Smith Place in its “The Quad” development in Cambridge.

Real estate developer The Davis Cos. is finishing construction in The Quad on four lab and office buildings in the block across from Iggy’s Bread. The developer renovated two buildings on the campus, and just wrapped construction on a new building at 101 Smith Place.

Davis’ chief portfolio management officer, Cappy Daume, said the company is in lease negotiations with its first tenant for 101 Smith Place. The company intends to redevelop another existing structure at 40 Smith Place, but has yet to apply for building permits.

Daume said she’s optimistic about the market, and thinks she sees the beginning of an upward trajectory.

“Demand is still slower than it was,” Daume said. While it may not be anytime soon, “we definitely believe that we are on track to go back to pre-Covid leasing levels.”

However quickly the bounceback occurs, Daume said it will be a more balanced market than before, given the number of real estate options available to new tenants.

Private developers, public benefits

Developer Cabot, Cabot & Forbes is also permitted for one building in the region, on Fawcett Street, but has yet to start construction.

In addition to creating a larger tax base – and the city is approaching its next fiscal-year budget with austerity in mind, compared with recent years – developments such as these can help Cambridge create public amenities. IQHQ acquired the long-shuttered Jerry’s Pond as part of its development and is returning it to being a public recreation space.

According to new zoning regulations, Healthpeak could build denser developments if it agrees to a major infrastructure project to help the city – either a new commuter rail station or a pedestrian and bike path across rail line that can now be crossed only via Blanchard Road or Alewife Brook Parkway.

The zoning also allows for denser buildings if developers deliver land for public use, such as open space or roadways.

“A lot of the improvements people hoped for are tied to their developments,” Brown said.