Boston Properties Inc. (NYSE: BXP) has agreed to acquire an aging office campus in Rockville that it plans to convert into Class A lab space to serve Montgomery County's booming biotech sector, the company announced Tuesday.
The Boston-based developer and landlord, owner of Reston Town Center and a host of other office properties across D.C. and Northern Virginia, will pay $116.5 million for the property, which sits about a half-mile from Interstate 270 and within a mile of the Shady Grove Metro.
The Shady Grove Bio+Tech Campus, as it will be called, comprises 435,000 square feet across seven buildings spanning 31 acres. Current owner Lantian Development had long pegged the property as the Grove at Rockville, which it described as a $650 million, phased development totaling 1.6 million square feet of residential, retail, office and hotel space.
“Growing demand, combined with limited supply, make Montgomery County, Maryland, and this cluster in particular, an attractive opportunity for [Boston Properties] to expand its life sciences presence,” Pete Otteni, senior vice president and co-head of the D.C. region, said in a statement.
Boston Properties, which will own 100% of the campus, plans to begin reconstruction of three of the buildings “promptly after closing,” which is expected in the third quarter. Those buildings are currently vacant. The other four will be converted to lab or life sciences-related uses as the tenants there vacate.
With the purchase, Boston Properties’ life sciences portfolio will grow to more than 4 million square feet — 3 million square feet is in service and 1 million more square feet is under development or redevelopment.
One commercial real estate services firm suggests more of these types of deals are to come.
“Owners of commodity, obsolete office product have been encouraged to consider office-to-lab conversions to take advantage of the market’s current supply-demand imbalance,” JLL wrote in its second quarter report on suburban Maryland’s office market. “As suburban Maryland’s life sciences sector continues to grow, the need for lab space has become urgent. Given high vacancy rates and lack of viable lab product, conversions will likely pick up as market dynamics demand.”
Tommy Cleaver, Dan Grimes, and Stuart Kenny of CBRE represented Lantian in the negotiations.
