But at a time when university endowments are under fire like never before, MIT’s big bet on its backyard feels just a bit more like a gamble than it used to.
After years of seemingly limitless growth, the value of office and lab buildings in Cambridge has stalled. Citywide, rents are falling. Vacancy rates are high. Cuts to federal research funding threaten the next generation of startups.
Yes, blue-chip companies still line up to rent space next door to one of the world’s preeminent research universities — and MIT’s buildings remain mostly full — but in a moment when the school could need its endowment most, one engine of that endowment’s recent growth looks less promising than it did just a few years ago.
The Kendall Square of today is a vastly different landscape than Kendall Square of decades past, due in large part to MIT’s investments. The university and neighborhood are inextricably linked, said Travis McCready, a former executive director of the Kendall Square Association who now chairs the global life sciences advisory board at real estate firm JLL.
“It’s impossible to draw a circle around MIT’s involvement in Kendall Square real estate,” he said. “It’s like trying to ask the question ‘How important is water to a fish?’ ”
And in this case, the fish owns a substantial portion of the aquarium.
Between 2020 and 2022, MIT built 1.2 million square feet of office space and housing across three buildings along Main Street and Broadway and renovated nearly 800,000 more. Before the COVID-19 pandemic, and before the buildings opened, they’d signed leases with blue-chip tenants, including Apple, Capital One, and Boeing’s Aurora Flight Sciences research unit, and have since launched work on yet another building, a 13-story office and lab at 200 Main St.
Still, even Cambridge isn’t immune to the broad pullback in the life-science, tech, and biotech markets in the years since COVID arrived. Asking rents for Cambridge lab space have fallen 15 percent since 2022, Newmark research shows — a steeper fall than lab rents in Boston — while office rents have dipped 13 percent. And one-fifth of all office space in Cambridge is vacant— the highest level since mid-2004.
The shift is noticeable, said Jennifer Schultz, a partner with Nixon Peabody in Boston who specializes in land use and permitting.
“MIT more than anyone else invested heavily into making Kendall Square the epicenter of technology, biotechnology, life sciences, tomorrow’s industry, that it is now,” Schultz said. “The first real experience, I think, that Kendall Square has had since its origin story of a shift in the wrong direction started in 2022 and is still continuing.”
But to be clear, Schultz said, there is no reason for MIT or its fund managers to panic. At a time when vacancy rates are high, two of the school’s new buildings along Main Street boast near-100 percent occupancy rates, while older 1 Broadway is majority occupied as well, research from brokerage Hunneman shows.
An MIT representative declined to discuss specifics beyond what the school discloses in its annual financial reports, which show how MIT’s real estate portfolio has swelled in the last five years. In fiscal 2024, the school reported its real estate investments at $4.9 billion, up 29.5 percent since 2020, though down 2 percent from the year prior.
Still, it’s but one slice of MIT’s larger endowment, and most major university endowments, experts say, are well-enough diversified to weather a real estate slowdown.
“For most universities it is not a significant percentage of their overall investment holdings or endowments’ holdings,” said Jessica Wood, an analyst at S&P Global Ratings.
MIT’s approach contrasts with that of Harvard Management Company, which has reduced the share of its $53 billion endowment that’s invested in real estate and natural resources from 25 percent in fiscal year 2018 to less than 6 percent in 2024 — $3.1 billion — with a pivot toward private equities.
“This strategic reduction has had a positive and compounding impact on the University’s endowment returns,” wrote N.P. “Narv” Narvekar, chief executive of the Harvard Management Co., in the university’s 2024 financial report.
Harvard is also taking a different approach to developing its real estate.
After years of planning, construction has begun at the school’s massive Enterprise Research Campus in Allston, which industry insiders view as Harvard’s answer to Kendall Square. But there’s one substantial difference: while Harvard owns the 14 acres of land where the campus will stand, it will not own the buildings themselves. Rather, it plans to lease the ground to private developers, who will build and own the facilities, and all the risk.
New York-based Tishman Speyer in fall 2023 broke ground on the project’s 900,000-square-foot first phase, including a hotel, 343 apartments, and 440,000 square feet of lab space, all expected to wrap construction later this year and early next.
So far, just about 30,000 square feet has been leased.
No matter the approach to real estate, one of the biggest draws for startups and big employers alike is to be next door to the world’s preeminent research universities, and all the bright people and ideas they generate. Cuts to federal funding could imperil that, and quickly ripple through neighborhoods like Kendall Square and Allston.
The stakes are massive. MIT received $1.7 billion in federal research funding during the 2022-23 school year, according to a recent report from the Urban Institute, while Harvard drew $686 million in 2024. Should that money dry up, the schools could need to draw more deeply on their endowments to support operations, even as the pipeline of research, and eventually companies, that fill the buildings nearby, would likely slow.
Of course, the innovation ecosystem around MIT and Harvard has been building for decades, back to the years after World War II when the federal government outsourced research and development to the private sector. Universities and institutions built their own R&D facilities, competed for lucrative federal grants, and — at least in MIT’s case — even helped build a neighborhood where those companies have grown.
And despite the unprecedented federal attacks on research and development funding — indeed, the very backbone of Massachusetts’ innovation economy, JLL’s McCready said he’s sleeping soundly when considering Kendall Square.
“When you take a look at Kendall Square, it is designed to be, and has proven, over a century and a half, to be one of the United States of America’s most verdant and prolific innovation districts,” he said. “The financial engineering and creativity necessary to make an environment like that economically successful — it’s ridiculously hard, yes, and MIT and MITIMCO in particular … they’re the OG at this.”
Schultz agreed. Despite so much turmoil, much of the work of the innovation system is still happening, she said. MIT, Harvard, and their various business incubators are still graduating founders and birthing companies, and those companies still need places to grow, like Kendall Square.
“The ideas are there, the research is there, the IP is being created,” she said. “Exactly zero people have said: ‘If given the opportunity, I would not invest in Kendall Square.’”
Catherine Carlock can be reached at catherine.carlock@globe.com. Follow her @bycathcarlock.
