Cancer biotech firm Arvinas has nixed plans to move into a new 164,000-square-foot outpost once slated to become its new headquarters in Connecticut, as the impact of remote work continues to weigh on tenants across the country.
The pharmaceutical company has officially severed ties for the space at 101 College St. near the Yale University campus, an Arvinas spokesperson confirmed to CoStar News, a decision prompted by its shift to remote work and having a more dispersed base of employees. It will pay a one-time termination fee of $41.5 million to Winstanley Enterprises, the property's landlord and developer.
"The decision was prompted by our realization that we really do not need the extra space," Kirsten Owens, Arvinas' director of corporate communications, told CoStar News. "The pandemic encouraged new ways of working, and we’ve now embraced a geographically diverse workforce with remote employees based across the country, in addition to our on-site employees, of course."
The company will remain based at Science Park, Owens said, a mixed-use campus where Arvinas currently occupies about 66,000 square feet of space across two buildings.
Arvinas preleased more than three floors of space at the 101 College St. development in 2021, a 10-story, roughly 525,000-square-foot building that completed construction earlier this year. The deal was expected to more than double the company's headquarters in the region and accommodate a workforce that had almost doubled to more than 250 people by the end of 2021.
"As a company incubated out of Yale, our commitment to New Haven is strong,” Arvinas CEO John Houston said in a statement at the time of the prelease deal. “We’re proud to continue to be a part of this rapidly growing biopharmaceutical hub and contribute to the continued development of the downtown area.”
Office Cuts
The company had expected to move in to the College Street space in 2025 as recently as early this year, according to information filed with the Securities and Exchange Commisson, saying that "its facilities are sufficient to meet our current needs and that suitable additional or alternative space will be available as and when needed on commercially reasonable terms for our future growth."
Similar to other companies across the country, however, the pandemic and its lingering impacts have prompted some to question their real estate obligations and have led to a slew of high-profile downsizings, sublet listings and terminated deals.
Hybrid mandates, in particular, have largely been attributed to pushing the national office vacancy rate up to a record high of nearly 14%, according to CoStar data. The policies have fueled some space cuts among companies that have looked to adjust their corporate real estate footprints to accommodate workforces that don't commute as often as they once did.
For Arvinas, Owens said about 55% of its employee base lives and works in Connecticut, with another 15% based in nearby states such as Massachusetts, New Jersey or New York. The remaining third are considered to be fully remote, and only travel to the company's New Haven hub if and when necessary. The company does not lease space for any ancillary offices.
The terminated deal at 101 College St. joins others across the U.S., prompting landlords to scramble to backfill the space.
Tenants collectively signed on for about 395 million square feet last year, according to CoStar data, about 13% below the annual average reported in the years leading up to the COVID-19 pandemic's 2020 outbreak. What's more, those deals are about 16% smaller on average than those signed between 2015 and 2019, exacerbating the vacancy challenges and onslaught of available space littered across the country's largest office markets.
While it has dropped from its pandemic-era peak, there is still about 196 million square feet of space sitting on the national sublease market, according to CoStar data, nearly double the amount reported at the end of 2019.