officestatus Summer // 2014

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1 Summer // 2014 Boston Pops Orchestra July 4th Inside... Greater Boston records its fifth straight quarter of positive absorption State Street completes its relocation to the Seaport District 888 Boylston Street tower set to begin construction next quarter East Cambridge records highest rents since 2000 Speculative development occurs along Route 128 Boston high-end residential development explodes in 2014 Luxury Residences on the Rise in Boston // Page 7 *Unless otherwise noted, all data is as of or for the quarter ended June 30, 2014 and is Transwestern RBJ data.

2 Economy & Real Estate STOCK MARKET // Equity Indicators EMPLOYMENT // US Bureau of Labor Statistics ABSORPTION & VACANCY // Greater Boston Relative Performance March 31, 2014 = 1.00 Jul Aug Oct Dec Feb Apr Jun Unemployment rate National unemployment rate Boston NECTA unemployment rate 0 Apr Jun Aug Oct Dec Feb Apr sf in millions (0.5) (1.0) 0 (1.5) Index Value 1 Qtr 4 Qtr Indicator Value 2 Qtr 4 Qtr 13.8 S&P Boston NECTA Employed 1, Quarterly +775,000 sf Morgan Stanley Hi Tech Ix Boston NECTA Unemployed Last Twelve Months +3.6 Million sf Greater Boston s fifth straight quarter of positive absorption in the office market continued the region s strong trend of real estate activity, as other economic indicators such as a superb unemployment rate and the revitalized support from the public markets affirmed Boston s place as one of the most desirable business locations in the country. The market as a whole has absorbed 8.5 million sf in the past 3 years, and asking rents have reached or remained near record highs for both the old guard (e.g., Cambridge) and the new (e.g., Newton, Wellesley, Seaport District). Premium properties still rule the landscape, as East Cambridge s rents pass $60 per sf for the first time since 2000 and Class A buildings in the Back Bay and Financial District account for 486,000 sf of positive absorption. But Class B properties are benefiting as well in places like downtown Boston, where Class B rents are growing at a faster rate than their Class A counterparts. Tenants absorbed 775,000 sf of office real estate in the second quarter of 2014, the major driver being the completion and delivery of State Street Bank s 500,000 sf build-to-suit project at One Channel Center in the Seaport District. Greater Boston s last-twelve-months construction completion number of 2.5 million sf is the highest it has been since 2003, and the recent go-ahead for 888 Boylston Street (the Back Bay s first new office tower in a decade) is indicative of the widespread desire to develop even the region s most ostensibly dense areas. The Seaport District, an area which only recently has begun to leverage both its superior location and its stock of inefficient property that was just begging to be upgraded, has been especially active with recent completions for State Street and Vertex Pharmaceuticals and more in the pipeline for upcoming periods. The Seaport s construction activity has spread to other use types as well, as the Legislature considers a $1 billion expansion to the Boston Convention and Exhibition Center and high-end condo developments sprout up along the waterfront. Out-of-town firms like Kayak, which recently committed to a lease at Canal Park in Cambridge, continue to value the classic tenets of the Boston area business experience, namely its far-reaching transportation system and its access to some of the country s finest intellectual capital. The Greater Boston real estate market continues to benefit from strong regional growth due to its diversified employer base and broadly educated workforce. Such high caliber companies have been able to attract significant investment from both the venture capital community as well as the IPO markets. Imprivata expanded its space in Waltham right before raising $75 million in its initial public offering, and Wayfair LLC s $157 million venture capital investment occurred around the same time that it increased its commitment at Copley Place, where it just relocated. Major players continue to look for entrées into the Greater Boston market, as evidenced by Bose s plans for expansion as well as Medtronic s pending $43 billion purchase of Covidien; it remains to be seen what impact both will have on the South and West markets. 2

Boston CBD Highlights Tenants absorbed 265,000 sf of space as vacancy remained stable at 10.3 percent despite increase to supply, with Back Bay Class A high-rise rents hitting mid $70s to low-$80s.

3 Boston CBD Highlights Tenants absorbed 265,000 sf of space as vacancy remained stable at 10.3 percent despite increase to supply, with Back Bay Class A high-rise rents hitting mid $70s to low-$80s. State Street Bank moved into its new built-to-suit facility in Channel Center, adding 500,000 sf of positive absorption to the Seaport while causing 430,000 sf of negative absorption in Midtown. & // Central Boston sf in millions (0.2) (0.4) (0.6) Class A properties in the Financial District and Back Bay drove 486,000 sf of positive absorption in the past quarter; their Class B counterparts accounted for 188,000 sf of negative absorption. Class B asking rents have grown $6.56 per sf, or 23.6 percent, in the past 3 years. Wayfair expanded into 170,000 sf at Copley Place, while Rapid7 moved into 46,000 sf at 100 Summer Street, Pri-Med took 44,000 sf at 111 Huntington Avenue and VMTurbo moved into 23,000 sf at 500 Boylston Street. 0 CURRENT DATA (0.8) 10.3 Quarterly Last Twelve Months Class A Asking Rates // Central Boston Class A Asking Rent per sf per year $80 FINANCIAL DISTRICT BACK BAY +265,000 sf +1.3 Million sf $70 Localytics relocated its headquarters into 19,000 sf at 101 Arch Street. 888 Boylston Street, the Back Bay s first new office tower in more than a decade, is set to begin construction in Q3. The Rockefeller Group and Mitsubishi Estate New York purchased 28 State Street ($345 million, 572,000 sf, $ per sf). $60 $50 $40 $30 CURRENT AVERAGE ASKING RATES Central Boston $51.65 Financial District $49.48 Back Bay $59.21 Seaport Keeps Itself Occupied // Changes in occupied sf by Boston submarket in the past 5 years TW RBJ BOSTON DEAL 80 change in occupied sf since Q Mid Inner Suburbs South Station North Station FD Longwood Charlestown Boston BB SEA Cambridge Innovation Center, 50 Milk Street Boston Transwestern RBJ acted as a landlord representative for Ponte Gadea Group in connection with a lease agreement. 70,000 sf 3

Cambridge Highlights dipped to 6.6 percent on 73,000 sf of absorption as Class A asking rents continued to surge upward, increasing $3.74 to $56.77 per sf. Mid Cambridge s vacancy has averaged 1.

4 Cambridge Highlights dipped to 6.6 percent on 73,000 sf of absorption as Class A asking rents continued to surge upward, increasing $3.74 to $56.77 per sf. Mid Cambridge s vacancy has averaged 1.6 percent since the beginning of East Cambridge rents passed $60 per sf for the first time since 2000; they have grown at a rate of $5.76 per year since & // Cambridge sf in thousands (100) MÄK Technologies and PointRight took 15,000 sf and 10,000 sf respectively at 150 Cambridgepark Drive, while Boston Scientific leased 15,000 sf at 125 Cambridgepark Drive and izotope took 35,000 at 60 Hampshire Street, which is being converted to office from lab. 0 (200) CURRENT DATA 6.6 Quarterly +73,000 sf Last Twelve Months +781,000 sf Kayak will move into 40,000 sf at 10 Canal Park later this year. Class A Asking Rates // Cambridge MIT announced it would replace Building 12 with a 200,000 sf nanoscale research facility called MIT.nano, which will open in Cambridgepark Drive and One Memorial Drive are now Blackstone Equity Office s lone Cambridge building after it sold 245 First Street, One Canal Park and 10 Canal Park for a combined $283 million. Class A Asking Rent per sf per year $70 $60 $50 $40 $30 $20 EAST CAMBRIDGE MID CAMBRIDGE WEST CAMBRIDGE One Alewife Center sold to the James Campbell Company ($21.6 million, 89,875 sf, $ per sf) and MIT purchased 620 Memorial Drive from Pfizer for ($30.5 million, 91,000 sf, $ per sf). $10 CURRENT AVERAGE ASKING RATES East Cambridge $62.97 Mid Cambridge NA West Cambridge $40.40 Cambridge Venture Capital Funding on Fire Largest VC investments to Cambridge companies in 2014 TW RBJ CAMBRIDGE DEAL COMPANY INDUSTRY INVESTMENT AMOUNT Voyager Therapeutics Biotechnology $45 million SAGE Therapeutics Biotechnology $38 million NinePoint Medical Medical Device $35 million Moderna Therapeutics Biotechnology $25 million NuoDB Inc. Software $14 million Source: PricewaterhouseCoopers 10 Canal Park, Cambridge Transwestern RBJ acted as a landlord representative for Equity Office Properties in connection with a lease agreement. 40,000 sf 4

5 Route 128 Highlights remained steady at 15.2 percent on 239,000 sf of positive absorption as Class A rents climbed to $27.83 per sf. & // Route sf in thousands West experienced its 8th straight quarter of positive absorption, during which time its vacancy rate dropped from 16.2 percent to 12.0 percent. Newton and Wellesley s Class A rents have grown 27.3 percent and 23.4 percent, respectively, in the past 12 months. Amadeus North America moved into 56,000 sf in Waltham and Intralinks took 51,000 sf in Waltham, while Imprivata expanded by 21,000 sf at Lexington Corporate Center right before raising $75 million in its IPO; Thomson Reuters moved out of 62,000 sf in Quincy (200) (400) (600) 0 (800) CURRENT DATA 15.2 Quarterly +239,000 sf Last Twelve Months +821,000 sf Monotype Imaging agreed to relocate from 500 Unicorn Park Drive into 42,000 sf at 600 Unicorn Park Drive in Woburn, creating a large block of availability at their soonto-be former building. The re-ignited development at University Station (formerly known as Westwood Station) is back on track with Wegmans and Target expected to deliver in Spring 2015, while the Quincy Center redevelopment has been side-tracked due to increasing construction costs and financing obstacles. Class A Asking Rates // Route 128 per sf per year $40 $35 $30 $25 $20 Class A Asking Rent ROUTE 128 NORTH ROUTE 128 WEST ROUTE 128 SOUTH The Gutierrez Company plans to move forward with a new 100,000 sf development on the land it recently acquired at 4 Burlington Woods. California-based GI Partners acquired 850 Winter St. from Davis Marcus Partners and Prudential Real Estate ($72.8 million, 180,000 sf, $ per sf). $15 CURRENT AVERAGE ASKING RATES Route 128 North $26.86 Route 128 West $33.24 Route 128 South $21.47 Burlington s Office Sale Frenzy // 56 percent of Burlington s office buildings have changed hands since 2010 TW RBJ 128 DEAL Sales 2012 Sales 2011 Sales 2010 Sales 2014 Sales TBD 2013 Sales Sales Sales Sales 3 93 Worcester Street, Wellesley Gateway Wellesley Transwestern RBJ acted as landlord representative for CommonWealth Partners in connection with a lease transaction. 126,000 sf 5

Interstate 495 Highlights fell to 20.9 percent on 172,000 sf of positive absorption as Class A rents rose to $20.21 per sf. Framingham/Natick is 9.4 percent vacant; the rest of 495 West is 26.

6 Interstate 495 Highlights fell to 20.9 percent on 172,000 sf of positive absorption as Class A rents rose to $20.21 per sf. Framingham/Natick is 9.4 percent vacant; the rest of 495 West is 26.2 percent vacant. 495 South has experienced positive absorption for eight of the last ten quarters, totaling 435,000 sf; during this time, vacancy has decreased by 15.1 percent. & // Interstate sf in thousands (200) (400) (600) Quest Diagnostics consolidated into 200,000 sf in Marlborough, as SimpliVity expanded into 50,000 sf in Westborough and St. Jude Medical expanded in Westford by 40,000 sf. Morpho Detection signed a lease for 64,000 sf in Andover, where it will move in the 3 rd quarter. Uncertainty swirls around Covidien s five-building campus in Mansfield after the company struck a deal to be acquired by Medtronic for $43 billion. 495 West s heavyweight tenants continue to be active with several large users actively identifying and competing for Class A leasing options in excess of 100,000 sf. Capital market activity has expanded to I-495 with a flurry of recent properties being sold or actively marketed including Brickstone Square in Andover, 800 Federal Street in Andover and Cross Point in Lowell. Curo Enterprises acquired 130 Lizotte Drive in Marlborough ($11.8 million, 100,000sf, $ per sf) and Tritower Financial Group purchased 300 Apollo Drive in Chelmsford ($39.4 million, 293,000 sf, $ per sf). 0 Class A Asking Lease Rates // Interstate 495 per sf per year $24 $23 $22 $21 $20 $19 $18 $17 $16 CURRENT DATA Class A Asking Rent I-495 NORTH I-495 WEST I-495 SOUTH (800) 20.9 Quarterly Last Twelve Months +172,000 sf +482,000 sf CURRENT AVERAGE ASKING RATES I-495-North $19.33 I-495-West $21.05 I-495-South $21.08 Rents Grow in Familiar and Unexpected Places // Largest increase in Class A asking rents, submarkets and micro-markets TW RBJ 495 DEAL Lowell Seaport East Cambridge Burlington Wellesley North Station Newton Class A Increase, LTM Speen Street, Point West Place Framingham Transwestern RBJ represented the landlord, Marcus Partners in connection with three lease agreements (Patheon Inc., EH Publishing, and TEKsystems, Inc). 38,000sf 6

Market Interesting Luxury Residences on the Rise in Boston High-end residences are lighting up the Boston

Rents in these new residences range from $2,600 on the live portion of live-work-play has resulted in an

development across every neighborhood in the city. More than 8,000 residential millions of dollars.

from 2014 to 2016, according to a deliver 30,000 new residences to the city by 2020 seems to be off to a good

Ink Block // Under Construction: Expected in 2015 Twenty Two Liberty // Under Construction: Expected in 2015

Seaport Seaport Midtown Size (SF): 548,900 (4 Buildings) Size (SF): 250,000 Size (SF): 372,300 Size (SF):

Construction: Expected Summer 2016 The Kensington // Completed: Opened Fall 2013 The Radian // Completed:

District Midtown Size (SF): 1,200,000 Size (SF): 457,000 Size (SF): 228,865 Size (SF): 384,000 # of Units 450

7 Market Interesting Luxury Residences on the Rise in Boston High-end residences are lighting up the Boston skyline, as the city s recent emphasis recent article in the Boston Globe. Rents in these new residences range from $2,600 on the live portion of live-work-play has resulted in an explosion of luxury living to upwards of $10,000 per month, with penthouse asking sale prices going for development across every neighborhood in the city. More than 8,000 residential millions of dollars. The City of Boston s Housing Boston 2020 initiative a plan to units are expected to be delivered in Boston from 2014 to 2016, according to a deliver 30,000 new residences to the city by 2020 seems to be off to a good start. Ink Block // Under Construction: Expected in 2015 Twenty Two Liberty // Under Construction: Expected in 2015 Waterside Place // Completed: Opened Winter 2014 Millennium Place // Completed: Opened Fall 2013 South End Seaport Seaport Midtown Size (SF): 548,900 (4 Buildings) Size (SF): 250,000 Size (SF): 372,300 Size (SF): 390,000 # of Units 475 # of Units 118 # of Units 235 # of Units 256 Millennium Place Tower // Under Construction: Expected Summer 2016 The Kensington // Completed: Opened Fall 2013 The Radian // Completed: Opened Spring 2014 Avalon Bay Tower // Under Construction: Expected Summer 2015 Midtown Midtown Financial District Midtown Size (SF): 1,200,000 Size (SF): 457,000 Size (SF): 228,865 Size (SF): 384,000 # of Units 450 # of Units 385 # of Units 240 # of Units 404 With 46 annual publications, Transwestern RBJ produces more research than any other commercial real estate advisory firm in Greater Boston. For more information, contact us at peter.mcquaid@transwestern.com. Peter McQuaid Research peter.mcquaid@transwestern.com 7

8 Summer // 2014 /Occ Growth Construction $Cl A Asking Rent Area RSF Vac Q2 14 LTM* Growth** Comp LTM* Pipeline Class A 4Qtr Ch*** TOTAL MARKET 182, , ,482 2,790 $ BOSTON SUBMARKETS 71, , ,630 1,801 $ Financial District 35, $ Back Bay 13, $ Longwood/Inner South 5, $ Seaport District 8, , $ Charlestown 2, NA Midtown 2, $55.00 NA North Station 2, $ South Station 1, NA NA CAMBRIDGE 11, $ East Cambridge 7, $ Mid Cambridge 2, NA West Cambridge 1, $ SUBURBAN SUBMARKETS 99, , $ Inner North 3, $ Route 128 & I , , $ Route , $ Route 128 North 25, $ Route 128 West 22, $ Route 128 South 13, $ I , $ I-495 North 15, $ I-495 West 16, $ I-495 South 2, $ ALL AMOUNTS, EXCEPT PERCENTAGES AND $ FIGURES IN THOUSANDS * LTM = Last twelve months // ** LTM absorption as a percentage of occupancy levels twelve months ago // *** Twelve months change in asking lease rate Looking Forward... Will Boston low- to mid-rise buildings continue to see heightened activity as Seaport supply dwindles? Will we see another new construction project announced in 2014? How will gap between Route 128 and I-495 rents affect suburban tenant activity? Who will be the next blue-chip company to come into Cambridge? Peter McQuaid Research peter.mcquaid@transwestern.com Copyright 2014 Transwestern RBJ, all rights reserved

officestatus Spring // 2014

officestatus Spring // 2014 Spring // 214 Faneuil Hall Marketplace Inside... Four-quarter positive absorption of 3.6 million is the most recorded since 27. Vertex Pharmaceuticals, Schneider Electric and Pfizer complete 1.5 million