By Cole Young

There is no dispute that Boston is the hub for life science research and education.  And, while the commercial real estate market in and around Boston has suffered post-COVID, we are still seeing a lot of deal activity, particularly in leasing and subleasing of life science research facilities. 

Referring to “life sciences” in the commercial real estate context can have a very broad meaning and include a wide range of uses: research benches, chemistry labs, biology labs, vivarium, GMP manufacturing, clean rooms, medical device, wet labs and dry labs.  Because of this broad range, there is a lot of flexibility and many nuances to commercial leasing in the life sciences sector.  Below are some high-level considerations that we often work through when negotiating on behalf of landlords, tenants, licensees and other users.

1. Use

The lease should explicitly permit the tenant’s intended activities, including research, laboratory work, testing, and manufacturing.  Some activities, like vivarium use, can be very controversial.   A such, it is critical to spell that out as early as possible in the process. Moreover, the use must be consistent with local zoning laws and comply with federal agencies such as the FDA, OSHA, and EPA.

2. Rent and Operating Expenses

Life sciences leases often involve significant operational costs. The parties should negotiate:

• Base rent vs. additional costs – Understanding the full financial burden.
• Escalation clauses – Limiting excessive rent increases.
• Operating expense allocations – Determining what costs are shared with other tenants.

3. Premises Specifications and Improvements

Life sciences companies often require custom-built spaces, including wet labs, clean rooms, and vivarium. The lease should specify:

• Permitted improvements – What modifications the tenant can make.
• Construction responsibilities – Whether the landlord or tenant is responsible for build-outs.
• Approval process – The extent of landlord oversight and approval required for modifications.
• Restoration obligations – Whether the tenant must return the space to its original condition upon lease termination.

4. Tenant Improvement Allowance (TIA or TA)

Due to the high costs of specialized infrastructure, tenants often negotiate for a Tenant Improvement Allowance (TIA or TA) from the landlord.  This is usually represented as a certain dollar amount per square foot.  We have seen everything from $25/sqft to $500/sqft, depending on the use, sophistication of the parties, and lease length.  A good TIA provision should specify:

• The amount provided by the landlord for improvements.
• Whether the funds are reimbursable or included in the rent.
• How the improvements will be amortized over the lease term.
• Whether unused funds can be applied to rent or other expenses.

5. Maintenance and Repairs

Life sciences leases must distinguish responsibilities between landlord and tenant, including:

• Structural maintenance – Typically the landlord’s responsibility, but if the tenant is taking the entire building, it may fall on the tenant. Additionally, if the tenant does something that affects the base building, it will likely “own” any repairs/modifications associated with that.
• Lab equipment and fixtures – Typically the tenant’s responsibility, but sometimes included as part of TIA.
• Specialized systems – Maintenance of backup generators, fume hoods, and temperature-controlled environments.

6. Utilities and Essential Services

Research and development facilities require uninterrupted access to electricity, water, gas, and ventilation. The lease should specify:

• Service reliability guarantees – Ensuring minimal disruptions.
• Backup power requirements – Covering generators and redundancies.  Often, there is a building backup generator and a generator specific to the tenant’s space.  These generators are usually located on the roof and, as such, the parties need to discuss space allocation during lease negotiation.
• Mitigation measures for outages – Allowing rent adjustments or alternative solutions if utilities fail.

7. Access and Security

Given the sensitivity of life sciences research, tenants need enhanced security measures. The lease should address:

• Restricted access – Who has permission to enter controlled areas.
• Biometric entry systems – Allowing tenants to install advanced security.
• Surveillance and monitoring – Whether the landlord or tenant manages security cameras.
• Security personnel – If required, how costs are allocated between landlord and tenant.

8. Assignment and Subleasing

Given the dynamic nature of the life sciences industry, companies may experience mergers, acquisitions, or changes in funding. The lease should address:

• Assignment rights – Whether the tenant can transfer the lease to a new entity without landlord approval.
• Subleasing permissions – Allowing space-sharing with third parties. In the past few years, this has also included the ability to license space.
• Financial responsibility – Ensuring the original tenant remains liable for obligations unless otherwise negotiated. Often, even if a tenant assigns or subleases, the original tenant remains liable and responsible for performance under the lease.

9. Regulatory and Licensing Considerations

Life sciences tenants often require permits and licenses to conduct research or manufacturing. The lease should consider:

• Zoning laws permit intended operations – Avoiding potential shutdowns due to legal restrictions.
• Landlord cooperation – Assisting in obtaining necessary permits. While landlords will “assist,” it is often limited and at the tenant’s cost.
• Future modifications – Allowing compliance with new regulations without renegotiating the lease.

10. Environmental and Safety Compliance

Life sciences operations often involve hazardous materials, necessitating strict environmental and safety protocols. The lease should outline:

• Waste disposal – Procedures for chemical and biohazardous waste.
• Acid Neutralization tanks – Need to address location, capacity and liability related to acid neutralization tanks.
• Hazardous material storage – Compliance with local, state, and federal laws.
• Emergency response protocols – Procedures for spills, contamination, or accidents.
• Landlord protections – Ensuring pre-existing environmental contamination is not the tenant’s responsibility.

11. Insurance

Life sciences operations present higher risks, requiring specific insurance policies. The lease should specify:

• General liability insurance – Protecting against third-party claims.
• Environmental liability insurance – Covering contamination or hazardous waste issues. This is very expensive coverage and should be priced out early in the process.
• Property damage insurance – Ensuring coverage for specialized equipment and improvements.
• Business interruption insurance – Protecting against revenue loss due to facility damage or disruptions.

12. Expansion Rights

As life sciences companies grow, they may require additional space. If applicable, the lease should include:

• Rights of first offer (ROFO) – The tenant gets the first opportunity to lease additional space before the landlord offers it to others.
• Rights of first refusal (ROFR) – The tenant can match an external offer for new space.
• Scalability options – Allowing flexibility in lease terms if expansion is anticipated.

13. Relocation and Termination Clauses

Landlords may include a relocation clause allowing them to move tenants to another space. This can be highly disruptive for life sciences operations, so tenants should:

• Negotiate relocation costs – Ensuring the landlord covers expenses. While conceptually very simple, the devil is in the details. We have spent a lot of back and forth during negotiations about what is included/excluded.
• Require comparable space – The new space must meet specific operational needs.
• Limit relocation rights – Avoiding frequent or arbitrary relocations.

14. Rent Structure and Operating Expenses

Life sciences leases often involve significant operational costs. Tenants should negotiate:

• Base rent vs. additional costs – Understanding the full financial burden.
• Escalation clauses – Limiting excessive rent increases.
• Operating expense allocations – Determining what costs are shared with other tenants.

15. Force Majeure and Business Continuity

Unforeseen events such as pandemics, supply chain disruptions, or natural disasters can impact operations. During and after COVID, landlords and tenants alike became obsessed with these provisions. As a result, they went from a small, throw-away provision to one of the most negotiated provisions in a lease. A force majeure clause usually addresses:

• Rent relief – Adjustments in case of prolonged facility inaccessibility.  Note that even during an emergency, most leases require continued payment of rent.
• Lease extensions – Adding time to compensate for shutdown periods.
• Flexibility in compliance obligations – Relaxing non-essential requirements during emergencies.

16. Decommissioning

When vacating a life sciences facility, tenants may need to decommission hazardous materials, dismantle specialized equipment, and restore the premises. The lease should specify:

• Decommissioning responsibilities – Who is liable for environmental cleanup.
• Restoration obligations – Whether the space must be returned to its original state.