A loan originated in Q3 for a 199,500-square-foot life science campus in Cambridge known as the Quad, which includes warehouse, laboratory and R&D facilities, brings together two commercial real estate trends unfolding in the Boston metro area, according to a CrediFi market report released today on commercial real estate lending in Boston.
Invesco Real Estate, the investment management firm that recently bought the Quad (75 Smith Pl., 40 Smith Pl., 75 Moulton St. and 10 Wilson Rd.) from commercial real estate firm HFF, received $70.2 million in financing from Forethought Life Insurance Company for the complex in August.
Here are the commercial real estate trends in the Boston market that are reflected in the Quad loan:
Read the full Q1-Q3 2018 report on CRE finance in Boston.
Cambridge’s role in the life sciences industry
One of those trends is the growing interest in life sciences, and the Cambridge area’s large role in that industry.
U.S. employment in biotechnology research rose 27% from September 2012 to September 2017, nearly four times as high as the growth rate for all jobs, CBRE reported in its 2018 market outlook on life sciences.
And the Cambridge lab market is “arguably the epicenter of the life science world,” Cushman & Wakefield said in its 2018 Biowatch Report. Vacancy is at historic lows for life sciences real estate in Cambridge, pushing effective rents to over $92 per square foot triple net, said the September report.
Indeed, the Bureau of Labor Statistics found that the Boston-Cambridge-Newton metro has the highest employment level of all U.S. metros for life scientists as of May 2017.
Invesco reportedly plans to redevelop the older buildings into a more up-to-date life sciences complex.
Insurance lending in Boston
The second trend reflected by the Quad loan relates to the lender that provided the financing behind it: Forethought Life Insurance Company, an Indianapolis-based subsidiary of Global Atlantic Financial Group, which spun off from Goldman Sachs in 2013.
Insurance and pension providers are active CRE lenders in the Boston metro area, originating about 20% of the Boston market’s largest CRE loans ($100 million and up) by dollar amount in the first nine months of the year.
Over the full period covered in this report, insurance and pension providers originated 10% of loans $100 million and up ‒ less than U.S. investment banks and foreign banks, but more than the U.S. regional and community banks that originate many of the small and midsize loans seen in the rest of this report.
The CrediFi report analyzed $48.4 billion in financing from the first nine months of 2016, 2017 and 2018 in the Boston metro market to determine which commercial real estate lenders are the market leaders for small and midsize loans, as determined by loan count, and how their lending activity has changed over time.