Massachusetts’ Big Pharma Cluster and Its Impact on Commercial Real Estate

By Liz Berthelette – Director of Research

This post originally appeared on RealMassive.com 4/6/17

Massachusetts, anchored by Cambridge, is home to one of the largest biotech clusters in the world. With many of the leading “big pharma” firms maintaining a presence here, this industry has become a key driver of commercial real estate demand throughout the Bay State. In fact, 16 out of the top 20 pharmaceutical companies investing heavily in research and development operations lease and/or own space in Massachusetts. In looking at the potential future demand for office and/or lab space these heavy investors will likely play a key role, especially if their current presence in the marketplace is minimal.

The chart below highlights each firms’ research and development investment dollars in the fiscal year 2015-16 and its estimated real estate footprint in Massachusetts. Novartis ranked first in the European Commission’s 2016 EU Industrial R&D Investment Scoreboard and occupies more than one million square feet in Greater Boston. Due to its MA-based headquarters operations, Biogen boasts one of the largest footprints in the market despite ranking among the bottom of this list for investment dollars.

Pharma R&D

*Occupied by Roche subsidiary, Iquum. Sources: EU Scoreboard 2016 (World 2500), Costar, NAI Hunneman Research

There are a handful of firms that made the list that have little to no real estate presence in Massachusetts such as Roche, Eli Lilly, Johnson & Johnson and Bayer. With that said, many are planning to expand in Cambridge or are already collaborating locally:

  • Reportedly, Eli Lilly and Johnson & Johnson have fairly large requirements out in the Cambridge market.
  • Novo Nordisk has been collaborating with MIT on next generation drug delivery devices since 2015.
  • Bayer is opening its East Coast Innovation Center in Cambridge.
  • Boehringer Ingelheim’s venture capital arm opened in Cambridge in 2013 in order to invest in early-stage biotech companies.

One of the area’s largest pharmaceutical companies, Shire PLC, has continued to expand and currently occupies more than two million square feet in Greater Boston. However, the Lexington-based firm only invested $872 million in research and development last year; ranking the company 30th on the list. With that said, Shire recently agreed to lease 343,000 square feet at the Genzyme Center building in the heart of Kendall Square; establishing a hub for the research and development of rare diseases. This new innovation hub will house roughly 1,000 workers by 2019 ― after Genzyme relocates to its new headquarters nearby. One would expect Shire’s investment dollars to increase once this new R&D facility is operational.

Looking at revenues as opposed to R&D investment in the chart below, 14 out of the top 20 global pharmaceutical companies maintain a real estate presence in Massachusetts. Interestingly Johnson & Johnson, Bayer and Roche top this list as well. Other major pharmaceutical firms lacking a Massachusetts address include Sinopharm Holdings, Medipal Holdings and Alfresa Holdings. Could one of these companies be the next to set up shop here?

Pharma Revenue

*Occupied by Roche subsidiary, Iquum. Sources: EU Scoreboard 2016 (World 2500), Costar, NAI Hunneman Research

While growth from companies currently located in Massachusetts will remain an important driver of commercial real estate, firms not-yet established here likely offer greater potential for future demand.

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