Cambridge Joins List of Boston’s Boomtowns

As reported in my last two posts on Fenway’s Boom and Boston’s Building Spree, “growth and development” is the name of the game in the city and surrounding areas. Cambridge is another hotspot that’s only getting hotter, fueled by the fact that the locale is the center of a statewide biotech boom.

“Cambridge has definitely benefited from the growing trend of high tech and biotech companies moving closer to the talent pools they want to recruit,” said Boston real estate agent David Bates. “There is significant development occurring in Cambridge right now to accommodate these companies.”

In August, Chemical & Engineering News called Boston “the hottest place on Earth for biotech,” noting that Cambridge is the epicenter of the action. Some facts behind this claim include:

  • Global pharma giant Pfizer announced in July that it will consolidate its operations in Cambridge to a 500,000 square-foot campus for about 1,000 employees in Kendall Square.
  • To create the Kendall Square research facility, Pfizer will be expanding its lease agreement with a subsidiary of the Massachusetts Institute of Technology (MIT).
  • Industry insiders gathered soon after Pfizer’s announcement at the RealShare Boston 2015 conference to discuss the expanding biotech real estate boom and how it will affect trends in the rest of the state.
  • Eli Lilly recently announced plans to establish a new drug delivery and device innovation center in Cambridge to enhance the global healthcare leader’s local presence and help attract top scientists and bio engineers. The Lilly Cambridge Innovation Center will be located in Kendall Square.
  • The influx of biotech firms into Cambridge has led to other companies being drawn into the area as well, including those that provide services to the tech industry.
  • The Worcester Business Journal Online reports that 15 of the top 20 global biotech/pharmaceutical companies are present in Massachusetts—but many are getting priced out of Cambridge and Kendall Square because of the competition for space.

With biotech becoming such big business, Cambridge’s growth is flourishing in other ways as well. The Cambridge City Council has been reviewing recommendations for the site of a potential 500-foot skyscraper in Kendall Square—which would be the first of such towers in the square, where the tallest building currently (the Department of Transportation’s Volpe Center ) stands 13 stories high.

Needless to say, along with Cambridge’s commercial growth comes residential growth. Bates noted that while median condo price points in Cambridge (2014: $580K) are tame compared to Back Bay, Midtown, and the South End, his research has shown that nearly three-quarters of Cambridge condos sold for more than the list price, and almost 20 percent of buyers paid at least 10 percent more than list. “The sparse inventory has sparked Cambridge buyers to go to extreme lengths to buy the homes they want in Cambridge,” said Bates. In 2013, Bates reported in Curbed on a buyer—rumored to be a billionaire—who famously paid more than a million dollars over the asking price to secure the Cambridge home he wanted.

Yet while Cambridge is the only Hub condo market to sell more than 1,000 condos in a year (1,041 in 2005), Bates noted that the number of Cambridge condo listings in recent years has been a “bust rather than a boom” due to inventory shortage. In the first seven months of 2015, Cambridge only sold 336 condos—around 20 condos fewer than it sold in the first seven months of 2014, a year in which only 661 Cambridge condos closed.

In his e-book Context 2015: 14 Hub Condo Markets, Bates reported that since 2011, median prices have increased nearly 40 percent in Cambridge. He also noted that the real estate market in Cambridge stands out for being “the most insane of all markets” when it comes to buyers paying substantially more than the asking price. In 2014, nearly 20 percent of buyers in Cambridge paid $50K over-ask. “As a result of the hysteria over newly listed condos, Cambridge brokers often hesitate to put out a full market price as the listing price and instead often opt for ‘restrained’ list prices that will provoke showings, offers, and extreme over-ask bids,” Bates wrote in his e-book.

As interest in the Cambridge area continues to surge, developers will increasingly cater to the preferences of their future residents. “Developers in this area typically use the mantra that residents want to live work and play in the same area,” said Bates. “For example, a lot of Cambridge residents use their bike as their main form of transportation. This might provoke a Davis Square BBQ restaurant to use a bike valet.”

From 2009-2014, the House Price Index (HPI) shows home prices for Cambridge saw a total appreciation of 10.6 percent. This hot market is not expected to fizzle any time soon. Real estate industry analysts predict the house price trend to continue its upward trajectory until at least the third quarter of 2017.

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