Groundbreaking science isn’t new to Kendall Square. It’s been a foundation of the Cambridge, Mass. neighborhood since 1876, when Thomas Watson picked up the first-ever “long distance” phone call from his partner, Alexander Graham Bell, at what is now the site of a biotech incubator. The call originated only two miles away from Bell’s lab in Boston, but it triggered a domino effect of transformations that forever changed how we communicate with each other.

About a century after that pivotal phone call, another science revolution kicked off in Kendall Square, this time involving the building blocks of genetic code. At the time, 1970s Cambridge resembled most other post-industrial cities, with its abandoned factory buildings, decrepit parking lots and a lingering smell of chemicals in the air. But a wealth of talent remained in the city at institutions like MIT and Harvard. So in 1977, when the city council passed the first legislation in the U.S. that allowed and regulated research into recombinant DNA, the floodgates opened and the neighborhood transformed into a bustling hub. Cambridge is now home to over 250 biotechnology companies, more than 120 of which are within the Kendall Square zip code. Its rapid rise as an innovation hub over the last half-century — and the last two decades in particular— has been driven by a sturdy talent pipeline, government support and a small footprint that allows bright minds to bump into each other like gaseous atoms.

In recent years, however, dynamics in the square have shifted as office and lab space has become scarce. Now, more large pharmaceutical companies are moving into the city, while early stage biotechs vital to the future survival of the ecosystem are being priced out.

“We had vacancy rates of zero and 1%, in Boston and Cambridge and that's not great if you're a smaller emerging biotech company looking for space, having to overpay for a space or get a bigger space,” Joe Boncore, president of MassBio, said.

And to remain competitive with other hubs across the country, many of which are boasting higher vacancy rates, the state has begun incentivizing companies to settle in the Greater Boston suburbs.

Kendall Square’s emergence

Cambridge’s biotech boom is directly linked to the city’s 1977 recombinant DNA research law, which attracted many scientists who went on to launch some of the biggest companies in the sector.

A year after the law was passed then-MIT professor Phillip Sharp founded Biogen in Kendall to develop a novel rDNA technology he discovered in his research lab. And when, in 1989, Biogen earned its first FDA approval for a recombinant hepatitis B vaccine, companies such as Genzyme took notice and began to migrate to Cambridge.

“You can almost track and rate the big biotech hubs that are in the country, based on how many companies were able to get a drug approved and become a profitable, revenue-generating biotech,” Chris Garabedian, CEO of Xontogeny said. “Boston, Cambridge — there are more companies that fall into that category by far than any other city considered a biotech hub.”

As more companies settled in the area, investment opportunities and available talent also began to increase, creating an ecosystem, Garabedian said. People who moved to the city for one job in genetics would build experience and then take on a different position at another company down the road. That talent surge led even more companies to move to the area.

By 2011, when Garabedian took the helm of Sarepta Therapeutics, the ecosystem was in full force with loads of late-career experts mulling around the streets of Cambridge. It was a no-brainer to move the company to the area, he said.

“I needed people who understood genetic technology and rare disease. And when you look across the country or the world, where is there the most talent for genetic technology and rare disease? That was Cambridge,” he said.

Today, the appeal of Kendall Square and Massachusetts is the availability of experienced talent. While the address of a company doesn’t matter in early stage development, Garabedian said it does factor into investor decisions later on when companies need to “hire clinical operations people, regulatory affairs people, medical affairs people, commercial people,” and so on.

Stoking the fire

For many biotechs, a Massachusetts address has become key during late-stage development. For others, like Foghorn Therapeutics, a precision medicine company that expanded its Kendall headquarters in 2020, the diversity of experience in the area — from recent MIT and Harvard grads to executives — is what’s most appealing.

“We have research associates with no experience in the industry and some really senior folks that have been around for 30 plus years. It's a very diverse workforce in that sense,” Carlos Costa, chief people officer at Foghorn, said.

Diversity in other areas still lags, however. Like others, the Boston area has issues with race and inclusion, and its life sciences sector is no exception. According to a 2021 Mass Bio report, only 15% of the state’s biopharma workforce was Black, Latino or Native American despite making up 32% of the state’s overall population.

Several state and private initiatives are aiming to improve those numbers.

The commonwealth in September announced 39 new grants totaling $14.6 million to invest in STEM training programs for middle school to college-level students, with the hope of improving diversity in the sector.

The funding, which will be distributed by the Massachusetts Life Sciences Center (MLSC), a quasi-public agency, is the most recent in a series of large investments the commonwealth has made to stimulate overall growth in the sector over the last 20 years.

The first industry incentive came in 2008 when then-Governor Deval Patrick delivered a 10-year, $1 billion investment in grants, infrastructure improvement projects and tax incentives for companies developing breakthrough therapies in the region. A decade later, Gov. Charlie Baker committed over $600 million to expand those efforts, further adding fuel to the biotech fire.

With those investments, what began as a genetics and rare disease drug development hub has blossomed into a biotech nerve center. And with the number of hospitals and venture capital firms in the Boston area, the sector has grown at a rapid clip.

Feeding the pipeline

Garabedian said the “density” of companies in the area “brings with it some challenges.”

“In order to stay No. 1, you need to feed the pipeline. And the more companies that are started in Massachusetts, the more likely those companies will stay in Massachusetts,” he said.

When John Trzupek, chief operating officer of the Third Rock Ventures-funded Abata Therapeutics, was looking to move the company out of its current sublet office in 2021, there was little available.

“I happened to know from leaving my last institution that the market dynamics were really tough and Cambridge had very little capacity,” he said.

In 2019, right before the pandemic, lab space vacancy rates were at an all-time low of close to 1% in Cambridge. During that time, the state began encouraging companies to look for space further in the suburbs — including through an MLSC seed fund that supported biotechs who settled in cities like Lowell, Worcester, Springfield, Amherst and Pittsfield.

Now, more space is becoming available as some companies opt to go fully remote or hybrid, but rising rent prices in Kendall and Boston are continuing to corner small companies out of the market. According to a recent CBRE research report, the going rate for office space in Cambridge was $85 per square foot in the third quarter of 2022, compared to an average cost of $67 in 2020.

That’s one of the main reasons biotechs are continuing to move just outside of the main hub in cities like Watertown, Sommerville, Natick and Waltham — with only a few taking the state up on its investment offers to move further west.

“They don't have to overpay for space. They can spend more money on the science,” outside of the city, Boncore said. Trzupek, who has helped lead Abata’s transition from Kendall Square to a new biotech-focused development in Watertown’s Arsenal Yards, said the pandemic also lessened the need for companies to be right in the heart of the action.

“I feel like the tradeoff is much less than it would have been five or 10 years ago, when you probably would have felt a lot more stickiness to stay as close as you could to that Kendall Square T-station,” he said. “The amount of interactions that you just get on a random basis are different.”

He also noted the growing footprint of larger drug companies in Kendall Square has changed the dynamic. Sanofi, Novartis, Takeda, Bristol Myers Squibb, AstraZeneca and Moderna all have facilities in the area and many have sought to expand their footprints in the last few years.

Takeda, for instance, signed a lease for an additional 600,000 square feet of R&D space in June as part of a “long-term strategy to create a one Cambridge campus in Kendall Square that will bring employees together,” a spokesperson for the company said.

Their growing shadow — along with the ease of remote work— dampens the chances of bumping elbows with other scientists at coffee shops and bars in the square, Trzupek said.

“When I think of Kendall Square now I actually think of it as not that small geographical region, but I actually think of it as Greater Boston,” he said.

Ease of networking is still an important quality for the Massachusetts life sciences companies but Garabedian says now “it really depends on the culture of those organizations, and how outward facing they are.”

And even as companies move to the suburbs, Boncore argued its reputation of having a small, easy-to-navigate footprint will remain intact.

“It's easier to get to Worcester from Boston, and vice versa, than it is to get through a wall of Silicon Valley. And it's an easier ride and shorter ride,” he said.

Closer to the hub, navigation is even easier. At its new location in Watertown, Trzupek said there’s a direct shuttle into Cambridge, and a bike path that goes right into the heart of the city.

“We brought (our employees) out to the area multiple times now and they really love it because it's vibrant. There's a lot going on,” he said. “If I were to build a company today, like a brand-new company and start from scratch, I’d build in the Greater Boston area.”