Cheaper to lease than build the Science Complex

A large bio-tech company is going to expand in the Boston area. Should it join with Harvard to co-develop Harvard's Science Complex on Western Ave, or should it lease space in some buildings that are already built? Based on the data in this Globe story, it is a pretty easy choice.

Harvard's billion-dollar 589,000-square-foot complex was to be home to approximately 1,000 employees. Spending a billion to make lab space for 1,000 is $1M per person and $1,700 per square foot.

If Sanofi is leasing 112,000 square feet for $65M, that's $580 per square foot. (Globe story does not provide the length of the lease).

Now there are a whole bunch of assumptions and unknowns about both of these projects, but the conclusion seems valid. Finishing the Science Complex as previously designed will probably cost more like $650M than $65M. But in the current real-estate market, a "drug giant" need only spend the latter to achieve a major expansion.

Thinking about it this way supports my expectation that whatever Harvard and any partners will build on the Science Complex foundation will be much simpler and cheaper than what was previously designed. And leasing space in existing buildings will have to get much more expensive before it makes financial sense to build something new.

Another drug giant bringing jobs to Mass. - The Boston Globe

One of the world’s largest drug makers, Sanofi-Aventis SA, is planning a $65 million expansion in Cambridge that will create about 300 jobs...

Sanofi-Aventis has nearly 400 workers in Massachusetts, including 160 in Cambridge...

It has sublet 30,000 square feet of space elsewhere in Cambridge, but is now close to leasing 112,000 square feet at 640 Memorial Drive, an MIT-owned building aimed at life sciences companies, for the new division headquarters.

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