As the office market remains steady, a trend toward combined spaces is emerging. Companies that recently received funding or are trying to bring their research and development (R&D) teams in-house are now looking for spaces that can accommodate both office and lab/R&D components. What does flex space need to attract these tenants? We caught up with NAI Hunneman Assistant Vice President Jason Rexinis to find out more about flex space and what this trend means for the market:
Q: What exactly is flex space?
Jason Rexinis: Flex space is an interesting term. It is the combination of office, R&D, engineering or some capacity of lab space. When people think of traditional flex space they mostly think of large industrial parks that are just shipping and receiving terminals for companies like Amazon or Coca-Cola. But these spaces are not always for shipping companies – more recently buildings are developing and incorporating R&D/light lab spaces, which can help attract a wider range of tenants.
Q: What types of tenants are seeking flex space?
JR: Tenants that are interested in flex spaces right now are focused on R&D, engineering, biopharmaceuticals and medical devices. These companies are increasingly looking for both office and lab components, and the market for these spaces is pretty tight. Since January, we have already seen a tremendous amount of activity for the flex/R&D spaces in some of the buildings we represent in the 128 west market. Recently, biopharmaceutical company Cugene Inc. signed a 7,350-square-foot lease for their R&D operations at 411 Waverley Oaks Road in Waltham, a current target location. Medical device companies are also in the market for flex space, and these companies like to cluster together. Often when one signs a lease other firms will follow. Many potential tenants are companies that were established in traditional office buildings but in order to grow they are now looking for combined office and engineering space. Companies that have gotten funding for biotech lab requirements are also now looking at flex space solutions.
Q: Why the shift from traditional to new R&D spaces?
JR: I believe we are seeing this shift because of the current demand for experimentation areas. Growing biotech and R&D companies now want to perform internal experiments instead of outsourcing parts of their business. This is a win-win for many potential tenants because they don’t need to pay for lab space in another location and they can monitor everything going on under one roof.
Additionally, flex space offers more opportunities than traditional office space can. Not only is it cheaper than most traditional offices, but tenants can be more versatile within the four walls of the space as long as the building allows it. Another benefit is that these companies don’t need to worry about being too loud for their neighbors like they would in an office park.
Q: What amenities should new R&D spaces have?
JR: Because of this high demand for R&D and flex spaces, traditional office buildings do not have direct access to loading. There is usual a shared common area for shipping and receiving. . Access to loading is still a large concern for most tenants, so space on the ground floor is ideal. Many tenants need a small room for lab experiments, and often require VCT non-static tile flooring and some benching, while others may need ventilation as well. However, ventilation can get expensive, so in these cases space on a higher floor may be a better fit.
Q: Where is the real demand for flex spaces? Where are the most active spots?
JR: Landlords who have flex space availability are in high demand right now, especially along the Route 128 Loop. Due to high prices for lab space in Cambridge, tenants are seeking alternative locations for their operations. The real demand right now outside of Boston and Cambridge is in Waltham, Lexington, Newton and Watertown, along with an emerging cluster in Bedford. Towns that don’t have much lab space (like Burlington) are starting to feel a slowdown, which is a big part of the reason why Bedford is getting a lot of attention. As flex space continues to fill up, we will continue watching for new suburban markets that may emerge as a good fit for tenants.
Jason Rexinis is an Assistant Vice President with NAI Hunneman’s Suburban Leasing & Advisory Service Team. Jason advises clients on leasing & sale transactions in the 128 Market including Waltham, Burlington and Lexington.