OFFICE MARKET OVERVIEW

Transcription

1 OFFICE MARKET OVERVIEW Second Half 16

2 BOSTON CONTENTS Executive Summary 2 Financial District 3 Back Bay 6 Wharf District 8 Seaport 9 Neighborhoods Office Market Statistics 11 IS THERE A BUBBLE COMING? Boston s office market continued to outperform expectations in the first half of 16 reporting a positive absorption of 39,97 square feet though the first 6 months of the year, as well as an all-time high average asking rent of $2.2 per square foot. Over the same period, the overall market experienced a dip below 1 in availability for the first time since 8. This strength continues to attract global investors, developers and corporate occupiers alike. General Electric s announcement to relocate its headquarters to Boston further incited this trend, helping to create an unprecedented investment and development market for Boston in modern times. As the global economy remains unsettled, the Boston office market has seen a significant amount of foreign investment in search of wealth preservation and a potential positive return on their investments. Office buildings that had traded just a few short years ago in the $32/SF range have seen their values increase to over $6/SF another all-time high. These prices are fueled by the investment frenzy for quality assets in fundamentally strong markets like Boston, coupled with low interest rates, rising rental rates and, in some instances, little or no return-oninvestment requirements from foreign investors. What do these trends mean for occupiers of space? Office tenants that are entering negotiations for new space, or renewing their existing leases, can expect a tough negotiation with bullish owners. Rents have continued to increase, improvement allowances are at an all-time low and other concessions seen in the past are now extinct. Landlords are back to their dot-com and 7/8 peak behavior submitting leases to prospective tenants with a take it or leave it attitude, creating a difficult environment for the tenant that must negotiate in this market. Thompson Hennessey & Partners has been tracking the office market in Boston for over twenty-five years. One trend that has remained consistent over time is that the office market goes through a cycle every 7-9 years. Currently, the market is at an alltime high and charts indicate that we are at, or near, the top of the market. Factors and assumptions supporting a potential office market bubble include: Election - the outcome may affect the economy and therefore demand for office space. Interest rates - interest rates are near-zero and at some point, the Fed must raise rates which will slow development and make transactions more expensive. Increasing sublease - the inventory of sublease in the marketplace has spiked, with inventory increasing for the fourth consecutive quarter, typically a strong indicator of a coming office market correction. Increasing inventory - over two million square feet of new construction is scheduled to deliver in the Boston marketplace over the next 18 months. This new inventory is sure to affect the supply side, ultimately cooling the hot market. h i Rental Rates Average Rates of $2.2 are the highest Boston has seen in a decade, surpassing the last high cycle of 7. Availability Rates Availability Rates are currently at 9.3%, the lowest Boston has seen in a decade. ALL BOSTON: RENT LEVELS AND AVAILABILITY RATES Availability 1% $ 12% $ 9% $4 6% $4 3% $3 Rent '7 '8 '9 ' '11 '12 '13 '14 '1 '16 $3 Year Availability Rent

3 THE CHANGING FACE OF DOWNTOWN Vacancy increased slightly during the second quarter; this increase was largely impacted by the 4, Goodwin vacated at 3 State as it relocated to the Seaport. While vacancy (empty space) was up, overall availability (space being marketed) actually decreased to.2%. The conflict between rising vacancy and declining availability is due to the direction and rate of tenant migration within the market. Professional services companies are vacating large blocks of office space downtown in search of newly constructed properties in the Seaport which has caused vacancy to increase. Conversely, expansions by tenants currently located downtown, as well as an inward migration of TAMI* tenants is taking place, decreasing availability overall. This trend speaks to an ongoing demographic shift downtown, from a predominately professional services location to a TAMI rich extension of the Wharf District. Though the overall market in the Financial District remained strong in Q2, with increasing rents across all building classes and a series of bullish development proposals and buildings sales, a trend of increasing sublease space has also emerged which could indicate a slowdown in the office market. *Technology, Advertising, Media & Information HIGHLIGHTS Six developers submitted bids reaching $11 M for the rights to the Winthrop Square Garage development site, with the winning bid going to the Millennium Partners proposal for a story multi-use tower which includes 14 floors of office space. Filling in the hole left by Goodwin, Exchange Place welcomes The Boston Globe, which will lease 7, over two floors, as well as a 27,339 SF expansion in the building by Marcum LLP, bringing its size to,. Bullhorn officially occupied its new HQ at Summer in the beginning of Q2, relocating from The Wharf District. With 17 Federal and 4 Broad trading for roughly $632/SF and $62/SF respectively, developers are bullish regarding the future of the Financial District. 23.2% of Boston s available sublease space is located in the Financial District, of that 28.2% is located in Class A Premium buildings. General Electric is planning an Innovation Center at 26 Court, the former Boston Public Schools HQ, which could serve as an innovation landmark Downtown. FINANCIAL DISTRICT: RENT LEVELS AND AVAILABILITY RATES FINANCIAL DISTRICT RECENT LEASE TRANSACTIONS Boston Globe 3 State 7, McCarter & English 26 Franklin 6, The Brattle Group 1 Beacon 6, Marcum LLP 3 State, Ecog-Agrin Medical Research 28 State 17, Threat Stack Summer 14, NOTABLE BUILDING SALES SELLER BUYER 147 Milk Lexington Realty Trust 17 Federal 4 Broad 7 Franklin New Tower Trust The Blackstone Group Deka Immobilien GmbH TIAA-CREF Invesco Real Estate TIAA-CREF Deka Immobilien GmbH RENT LEVELS AND AVAILABILITY RATES SIZE SALE PRICE / PSF 2,337 SF $33.3 Mil / $63 SF 2, $139 Mil / $632 SF 267,66 SF $.3 Mil / $62 SF 8,977 SF $42.1 Mil / $49 TOTAL SF AVAILABLE SF AVAILABILITY FROM Q1-16 $/SF FROM Q1-16 Class A Premium 14,634,338 1,349,2 9.2% q $63.7 p Class A 12,69,18 1,246,3 9.8% q $7.4 p Class B 8,19, ,2 11.% p $47. p Other 2,976,891 38, % p $42.3 p Totals 38,466,193 3,91,3.2% q $.3 p 38,466, ,17.9% q $44.79 p Market Totals 38,466,193 4,29,7 11.1% q $4.4 p Availability 2 16% 12% 8% 4% '7 '8 '9 ' '11 '12 '13 '14 '1 '16 Year Availability $6 $ $ $4 $4 $3 Rent Rent SECOND HALF 16 3

4 FINANCIAL DISTRICT FINANCIAL DISTRICT SKYLINE 33 Arch St. 33 Arch St. 63,39 SF 83,268 SF 13.8% 1 Arch St. 1 Arch St. 46,396 SF 18,283 SF Atlantic Ave. 47 Atlantic Ave. 336,72 SF 19,.32.8% 6 Atlantic Ave. 6 Atlantic Ave. 1,1,29 SF 3,266 SF 2.9% 1 Beacon 1 Beacon 1,17,168 SF,799 SF 14.8% 1 Boston Place 1 Boston Place 82,716 SF 93,481 SF 11.6% Cambridge St. Cambridge St. 6, 86, SF 14.4% Congress St. (Atlantic Wharf) Congress St. (Atlantic Wharf) 791, 1 Federal St. 1 Federal St. 1,1,7 SF 74,729 SF 6.7% Federal St. Federal St. 1,323,,9 SF 1.% ,39 SF 83,268 SF 13.8% 46,396 SF 18,283 SF ,72 SF 19,.32.8% 1,1,29 SF 3,266 SF 2.9% 1,17,168 SF,799 SF 14.8% 82,716 SF 93,481 SF 11.6% 6, 86, SF 14.4% 791, 1,1,7 SF 74,729 SF 6.7% 1,323,,9 SF 1.% High St. HighTower 12 High St. Oliver Tower 1 International Place 2 International Place 1 Lincoln Milk St. 1 Post Office Sq. Post Office Sq. 3 - Rowes Wharf 28 State St. 98,347 SF 19,991 SF 19.%,93 SF 23,748 SF 4.3% 1,2, 122,92 SF 12. 7, 83,71 SF 11.1% 1,4,6 SF 34,318 SF 21,3 SF 6.3% 832, 9,884 SF 7.2% 782,34 SF 117, 14.9% 37,273 SF 46,2 12.3% 72,13 SF 3,444 SF 9.3% 38.M $63.7.2% Square feet in the Financial District. By far the largest submarket in Boston. Average asking rental rate for Year 1 of a lease in Class Premium A buildings. Overall availability percentage for space in the Financial District. 4 SECOND HALF 16

5 1 Financial Center Federal St. 1 Federal St. 64,1 SF 126,443 SF 22.4% 16 Federal St. 16 Federal St. 367, 28,739 SF 7.8% 17 Federal St. 17 Federal St. 227,36 SF 29,341 SF 12.9% 1 Financial Center 1,3,39 121,27 9.3% 2 Financial Center 2 Financial Center 2, 22 Franklin St. 22 Franklin St. 943,6 SF 137,184 SF 14.% 26 Franklin St. 26 Franklin St. 367,842 SF 27,679 SF 7.% 26 Franklin St. 26 Franklin St. 3,69 SF 36,61 SF.4% 99 High St. 99 High St. 73,192 SF 96,321 SF 13.2% High St. High St. 46,336 SF 63,692 SF 11.7% ,1 SF 126,443 SF 22.4% 367, 28,739 SF 7.8% 227,36 SF 29,341 SF 12.9% 1,3,39 121,27 9.3% 2, 943,6 SF 137,184 SF 14.% 367,842 SF 27,679 SF 7.% 3,69 SF 36,61 SF.4% 73,192 SF 96,321 SF 13.2% 46,336 SF 63,692 SF 11.7% State St. 6 State St. 7 State St. State St. 2 State St. 99 Summer Summer St. 12 Summer St. 426 Washington Available Space $/SF Washington ,234,434 SF 34, SF ,394 SF 137,876 SF 1.1% 843, 33,143 SF 38,74 SF 12.8% 231,194 SF 1 271,332 SF 33,492 SF 12.3% 1 Marina Park Drive 1,34,6 SF 27,47 SF 24.9% Northern Ave. 494,29 SF 8,786 SF 16.4% 14 Northern Ave. 33, 1 Seaport Blvd. 67,84 SF,962 SF 16.6% 121 Seaport Blvd. World Trade Center E 2 Seaport Lane World % $11M $63 Percentage of Boston s sublease space located in the Financial District. 4, 3,91 SF.7% 16, 12,67 SF 24.3% Available Space $/SF 9+ Millennium Partners bid to Available 8-89 Space redevelop the Winthrop Square $/SF Garage site , 439,8 SF 3,64 SF 8.1% 41, 3,834 SF 6,982 SF 1.4% Price per square foot paid by New Tower Trust for 147 Milk. SECOND HALF 16

6 BACK BAY AVAILABILITY, RENTS & SUBLEASE ON THE RISE At an average asking rent of $63.96/SF, Back Bay continues to boast the most expensive office space in Boston, but that number is heavily influenced by the price of Premium Class A space and new construction. Though direct vacancy remains low at 7.7%, overall availability and sublease space has been increasing throughout the first half of 16 as large TAMI* and financial services firms look to offload space after (or in preparation for) moves to the Financial District, Seaport and to new Back Bay offices. Overall demand, however, remains strong, especially in Class B and lower rated buildings. This is particularly true for buildings with premier locations such as those along Newbury. Though the prestige associated with a Back Bay location is still apparent on the whole, direct and sublease availability in Premium Class A buildings is up. This can be attributed to the unprecedented amount of new construction throughout Boston, causing tenants to choose between newly constructed buildings and older premium addresses at comparable rents. *Technology, Advertising, Media & Information NOTABLE BUILDING SALES 3 & 4 Boylston 1% SELLER BUYER Clarion Partners John Hancock Life Insurance RENT LEVELS AND AVAILABILITY RATES SIZE SALE PRICE / PSF 19,72 SF $. Mil / $27 SF $7 HIGHLIGHTS Boston Properties newly constructed 888 Boylston is set for Q3 delivery, with asking rents in the $9s and only 4,68 of 42, still available. Direct Availability increased slightly to 11.9% and overall weighted average asking rents reached $63.96/SF. With availability at 14.6%, Class A Premium space had an average asking rent of $71.43/SF in Q2. Remaining Class A inventory was $6.2/SF, less than that of comparable space in the Financial District, which was $7.4/SF. In Q2,.7% of all direct available space and 38.2% of all sublease space in Boston was located in the Back Bay. At 66,1 SF, sublease space reached its highest point since Q2 9. At Clarendon and 8 Boylston, Premium A sublease space above the th floor made up 26.% of all sublease space in the Back Bay and.1% of all sublease space in Boston. Direct Class A space above the th floor had an average asking rate of $79.34/SF and a total availability of 1.4%. Large amounts of space in 222 Berkley and Copley Place are available due to moves from Houghton Mifflin Harcourt, Liberty Mutual and State Bank & Trust. 31 St James Avenue financed $133 M to renovate the lobby, office spaces and common areas. They also became home to WeWork s 8, third Boston location. Continuing its trend of transit based development, Boston Properties is planning a 1.2M SF air right development at Back Bay Station. Notable tenants in the market are Wayfair for an additional, and Salesforce for an additional 3,. 12% $63 Availability 9% 6% $6 $49 Rent RECENT LEASE TRANSACTIONS Cybereason Clarendon 3, Community Builders 18 Dartmouth 3, 3% $42 Trunk Club 1 Boylston 2, SnapApp 222 Berkeley, $3 '7 '8 '9 ' '11 '12 '13 '14 '1 '16 Year Availability Rent Kyruus 222 Berkeley, Bostonian Group 1 Huntington Avenue 18, BACK BAY: RENT LEVELS AND AVAILABILITY RATES TOTAL SF AVAILABLE SF AVAILABILITY FROM Q1-16 $/SF FROM Q1-16 Class A Premium 7,47,919 1,32, % p $71.43 p Class A 4,723,119 68, % p $6.2 q Class B 2,39,73 3, % q $47.74 q Other 1,49,371 49,18 3.3% q $47.92 q Totals 1,67,144 1,86, % p $63.96 p 1,67,144 66,1 3.6% q $39.2 q Market Totals 1,67,144 2,431,669 1.% p $8.1 p 6 SECOND HALF 16

7 BACK BAY SKYLINE 6 8 Boylston St Berkeley St. Berkeley St. 222 Berkeley St. 399 Boylston St. 4 Boylston St. Boylston St. 3 Boylston St. 4 Boylston St. 699 Boylston St. 74 Boylston St. 8 Boylston St , 747, 128,394 SF 17.2% 24,19 SF 27,333 SF 2.% 21,328 SF 19,94 SF 7.9% 114,668 SF 13,493 SF 11.8% 76, 187,368 SF 24.6% 96,86 SF 3,124 SF 3.2% 93,896 SF 27,971 SF 29.8% 211,31 SF 41,4 SF 19.4% 111,97 12,16 SF.9% 1,7,499 SF 38,17 SF 3.2% 14,493 SF 1,4.6% Clarendon St Huntington Ave. 111 Huntington Ave. 177 Huntington Ave. Available Space $/SF Boylston St. 1 Copley Pl. 2 Copley Pl. 3 Copley Pl. 4 Copley Pl. 131 Dartmouth St. 116 Huntington Ave. 7 Park Plaza St. James Ave. 1 42, 4, % 1,7,398 SF 3,3 SF 28.7% 323,929 SF 73,3 SF 22.6% 23, 178,81 SF 77.7% 3,42 SF 3,42 SF 371,16 SF,939 SF 49,247 SF 9.7% 89,3 SF 9,481 SF 11.1% 274,218 SF 82,23 SF ,874 SF 48,327 SF 22.8% 168, 8,681 SF.2% 6,78 SF 11.9% $ % Overall availability percentage for space in the Back Bay. Average asking rental rate for Year 1 of a lease in Class Premium A buildings. Percentage of Boston s sublease space located in the Back Bay. SECOND HALF 16 7

8 Residential WHARF DISTRICT EPICENTER OF BOSTON S INNOVATION Boston s biggest story this year took place in the Wharf District, when General Electrical announced it would relocate its global headquarters from Connecticut to a 2. acre parcel on Necco Court. The new GE HQ will include the redevelopment of two historic brick & beam factories, as well as the addition of a third, more contemporary, building. The Wharf District has long been the home to small and midsized TAMI* firms who are attracted to the brick and beam buildings, lower rents, and the short walk to South Station. Now the Wharf District can add access and proximity to one of the country s oldest innovative companies as a major draw. The arrival of GE focuses the spotlight on the Wharf District as the epicenter of Innovation in Boston and should draw more tenants, causing rents to increase. *Technology, Advertising, Media & Information A TALE OF TWO CITIES Wharf District Tower Point Seaport HIGHLIGHTS Class A rents in the Wharf District are $2.62/SF, a discount when compared to the surrounding submarkets (Seaport $6.29/SF, Financial District $6.18/SF). At 14.7%, availability in the Wharf District is higher than the Seaport, a number that should drop as more companies look to relocate closer to GE. Crimson Hexagon departed the Seaport for the Wharf District, vacating its space at 1 Seaport Boulevard and doubling its footprint to 23, at 23 Summer. GE will relocate more than 8 employees to the new site by 18 and have already begun to move some employees into the space vacated by Bullhorn on Farnsworth. State, Procter & Gamble, General Electric, and LogMeIn occupy 28% of the Wharf District. Red Hat is searching for 4, in the Wharf District. NOTABLE BUILDING SALES SELLER BUYER 311 Summer ADD Inc. Portfolio: 332 & 374 Congress, 33-41, 34, 38 & 44 Farnsworth, & 263 Summer Ali Al Hashemi Clarion Partners TIAA-CREF SIZE SALE PRICE / PSF 7,22 SF $38.Mil / $673 SF 46,342 SF $22Mil / $ It s time to re-examine the landscape of the Seaport and the true boundaries of the Innovation District. While the Wharf District s brick and beam charm continues to attract innovative TAMI* companies, a growing ring of glass-box office and residential developments has emerged beyond the first few blocks of Summer and Congress s, offering a stark contrast in the occupant profile. These developments are primarily filled with more traditional/established office space users: law firms, accounting firms, life science companies, etc. With PwC occupying more than 33, at 1 Seaport Blvd, Goodwin relocating to 37, at 14 Northern Avenue, and with the M1 and M2 parcels approved for more than 1 million square feet of residential developments, the area has split into two distinct markets. As new developments continue to expand along the waterfront, some TAMI companies located in the Seaport are choosing to relocate closer to the Wharf District, or even the Financial District. Crimson Hexagon, at 1 Seaport Blvd with the likes of Foley Hoag and Nutter McClennen & Fish, recently moved to 23 Summer. RECENT LEASE TRANSACTIONS General Electric Farnsworth 44, Crimson Hexagon 23 Summer 23, MA Deptartment of Early Education 1 Sleeper, WHARF DISTRICT: RENT LEVELS AND AVAILABILITY RATES TOTAL SF AVAILABLE SF AVAILABILITY FROM Q1-16 $/SF FROM Q1-16 Class A Premium 1, Class A 96, , % q $2.62 p Class B 3,469,39 628,3 18.1% p $47.4 p Other 248, Totals,184, , % q $48.4 p,184, , % p $39.1 p Market Totals,184, , % p $46.7 p 8 SECOND HALF 16

9 A MATURING MARKET The second quarter saw the continued trend of premier consulting and legal services companies staking their claim along the waterfront. Over the past several years the once ubiquitous seaport parking lots have given way to a rapidly expanding collection of glass-box office and residential developments. The new residential and retail space, combined with the national trend for live/work/play communities, has helped turn the Seaport into a viable option for office tenants that have never previously considered leaving the Financial District. RECENT LEASE TRANSACTIONS Goodwin Northern Avenue 37, BCG 14 Northern Avenue, Ginko Bioworks 27 Drydock Avenue 7, NOTABLE BUILDING SALES 1 Seaport Boulevard SELLER BUYER Skanska USA Union Investment Real Estate UNDER CONSTRUCTION SIZE SALE PRICE / PSF 439,8 SF $42Mil / $1,29 SF 121 Seaport Boulevard Skanska USA 41, 14 Northern Avenue/Pier 4 Tishman Speyer 37, 6 Tide Kavanagh Advisory Group 36, SEAPORT HIGHLIGHTS Demand for space in newly constructed properties helped drive overall availability down to 8.2% and pushed Class A Premium rents to $6.29/SF, ahead of comparable space in the Financial District, which is at $63.7/SF. The M1 & M2 parcels, located next to 1 & 121 Seaport Boulevard, will be home to 3 residential towers containing 73 residential units and a retail-focused pedestrian mall. Skanska sold 1 Seaport Blvd to Union Investment Real Estate for $42 M or $1,29/SF, a per-square-foot record for a Boston building. Goodwin officially completed its move to 37, in the freshly delivered build-to-suit at Northern Avenue, the first time in 4 years that they will not have a presence in the Financial District. BCG signed a, lease at the under-construction Pier 4 office tower with plans to consolidate and relocate more than 7 employees from its offices at One Beacon and 3 State into Pier 4 by June 18. Ginkgo Bioworks took 7, of space at Marine Industrial Park with plans to hire in excess of new employees. Asking rents for Premium A Space reached $6.29/SF in Q2, while overall rents hit $.94/SF. The Seaport currently has over 84, of new office inventory under construction, including two new buildings, 121 Seaport Boulevard (41,) and 14 Northern Avenue/Pier 4 (37,). Cengage Learning is currently in lease negotiations at Northern Avenue. If The Fallon Company is able to secure them as a tenant, the building will be essentially fully leased. SEAPORT SKYLINE 1 1 Marina Park Drive 4, 3,91 SF.7% Northern Ave. 16, 12,67 SF 24.3% 14 Northern Ave. 37, 1 Seaport Blvd. 439,8 SF 3,64 SF 8.1% 121 Seaport Blvd. 41, World Trade Center E 2 Seaport Lane 3,834 SF 6,982 SF 1.4% World Trade Center W 1 Seaport Lane 7, 16,238 SF 2.8% 1 Available Space $/SF SEAPORT: RENT LEVELS AND AVAILABILITY RATES TOTAL SF AVAILABLE SF AVAILABILITY FROM Q1-16 $/SF FROM Q1-16 Class A Premium 3,8,98 182, q $6.29 p Class A 1,4, Class B 2,387,87 379, % q $44.2 p Other 7, q - q Totals 6,974,373 62,13 8.1% q $.94 p 6,83,7 26,827.3% q $42.87 p Market Totals 6,83,7 88,84 8.4% q $.7 p SECOND HALF 16 9

10 NEIGHBORHOODS NEW CONSTRUCTION WOOS TENANTS Winchester With overall asking rents at $36.84/SF, the Neighborhoods remained a stable market and an affordable alternative to space in the Financial District, Seaport and Back Bay. Availabilities held low in Q2 with an average direct availability of 6.1%. Arlington Medford Malden Everett Revere As tenants move into recently developed buildings in Somerville and Fenway and with new product set to deliver in Brighton, new construction is changing the face and makeup of office space in Boston s Neighborhoods. Belmont Somerville / Wellington Somerville Chelsea HIGHLIGHTS With the lower floors complete, Partners HealthCare will have moved approximately 1,7 employees to 123 Foley in Somerville by the end of the summer, with another 2, employees due to relocate to the 8, SF building when construction completes in early 17. Following Optum s Q1 decision to lease 126, at 132 Boylston, becoming the Van Ness Building s anchor tenant, Decibel recently announced it will also lease 32, in the building for its new headquarters which will contain office & lab space and is expected to open early in 17. Set to deliver in September, 8 Guest has 6,764 SF of available space, representing.7% of all direct available space in the Allston/Brighton market. Boston Landing is also the new home of the Bruins and Celtics. Allston/Brighton has the highest availability in the neighborhoods at 13.9%. Newton Watertown 9 Allston/ Brighton Brookline Cambridge Kenmore/ Longwood JP/Dorchester South Boston /South End 93 Boston Milton NEIGHBORHOODS: RENT LEVELS AND AVAILABILITY RATES TOTAL SF AVAILABLE SF AVAILABILITY FROM Q1-16 $/SF FROM Q1-16 South End/South Boston Class A 1,1, South End/South Boston Class B 2,178,32, % q $31.72 q South End/South Boston Other 1,94,47 6,63 4.1% q $22.9 q Allston/Brighton Class A 1,,88 6,764.7% q $4. q Allston/Brighton Class B 69,98 133, % p $33.39 p Allston/Brighton Other 98,693 31,4 3.2% q $23.78 p Longwood/Kenmore Class A 3,79, ,621.6% q $1.89 q Longwood/Kenmore Class B 2,4,92 3,791.2% q $34.32 p Longwood/Kenmore Other 1,8,227 29,14 2.7% q $38.91 p JP/Dorchester Class A 282,421 6, 2.3% p $32. q JP/Dorchester Class B 1,3,327 18,24 1.7% q $33.93 p JP/Dorchester Other 343,233 1,4 4.% p $19. q Somerville/Wellington Class A 1,213, , p $32. p Somerville/Wellington Class B 1,793,799 76,6 4.2% q $31.3 q Somerville/Wellington Other 89,18 26, % q $19.43 p Totals,14,137 1,224,62 6.1% p $36.84 p,14, , % q $29.28 q Market Totals,14,137 1,492, % p $3.48 p SECOND HALF 16

11 RENT LEVELS AND AVAILABILITY RATES Submarket Total Square Feet OFFICE MARKET STATISTICS Square Feet Available Quoted Rent/SF Rent from Q1 16 Direct Available Available from Q1 16 Available Rent/SF Available w/ Financial Class Premium A 14,634,338 1,349,2 $63.7 p 9.2% q 97,132 $ % Financial Class A 12,69,18 1,246,3 $7.4 p 9.8% q 13,69 $47.1.9% Financial Class B 8,19, ,2 $47. p 11.% p 1,872 $ % Financial Other 2,976,891 38,737 $42.3 p 12.8% p 6,2 $ Back Bay Class Premium A 7,47,919 1,32,487 $71.43 p 14.6% p 247,93 $ % Back Bay Class A 4,723,119 68,37 $6.2 q 14.4% p 267, $34.1.1% Back Bay Class B 2,39,73 3,139 $47.74 q 4.3% q 44,32 $ % Back Bay Other 1,49,371 49,18 $47.92 q 3.3% q 7,66 $ % Seaport Class Premium A 3,8,98 182,849 $6.29 p 6. q 16,238 $48. 6.% Seaport Class A 1,4, Seaport Class B 2,387,87 379,164 $44.2 p 1.9% q,89 $ % Seaport Other 7, q - q Wharf Class Premium A 1, Wharf Class A 96, ,47 $2.62 p 14.1% q 111,488 $ % Wharf Class B 3,469,39 628,3 $47.4 p 18.1% p 62,179 $ % Wharf Class Other 248, North Station Class A 1,,471 9,17 $. p.9% q 9,98 $ % North Station Class B 4,916,978 19,649 $44.34 p 3.2% q 29,97 $4. 3.8% North Station Other 166,336 4,73 $33.17 q 2.8% p % South Station Class A 394,42 44,18 $ % q 13,83 $ % South Station Class B 773,87 46,997 $4.71 p 6.1% q 1,74 $ % South Station Other 281,721 17,943 $36.43 p 6.4% q % Charlestown Class A 747,837 6,913 $4.97 p 7.6% q % Charlestown Class B 2,268, ,766 $31.39 p. q - -. Charlestown Other 327,888 1,49 $23.42 p 1.7% q % S. End/S. Boston 4,974,42 27,792 $29.1 p.4% q 28,462 $ Allston/Brighton 2,672, ,36 $39. p 13.9% p 66,617 $ % Longwood/Kenmore 6,922,149 24,926 $.6 p 3.6% q % JP/Dorchester 1,678,981 4,19 $28.9 p 2.4% q, $2..4% Somerville/Wellington 3,897, ,118 $3.96 p 7.6% p 122,242 $32.8.7% Totals 97,34,881 9,1,164 $2.2 p 9.3% q 1,482,23 $ % Class A Totals 4,643,7,47,997 $9.2 p 9.9% q 1,18,63 $ Class B Totals 32,164,143 2,921,213 $43.23 p 9.1% q 283,292 $ Class Other Totals,497,31 671,94 $36.4 p 6.4% q 4,668 $ % 9.3% $ % Percentage of Boston s available space; majority in Class A buildings. Average asking rental rate in all of Boston for Year 1 of a lease. Percentage of sublease space that is in Class A buildings. SECOND HALF 16 11

12 ABOUT THIS OVERVIEW The Thompson Hennessey & Partners Boston Office Market Overview is a biannual publication of Thompson Hennessey & Partners. Research analysts gather and evaluate office market statistics to create a comprehensive examination of commercial real estate. Thompson Hennessey & Partners tracks office buildings of, sq ft or larger. Thompson Hennessey & Partners also maintains a proprietary database system containing tenant information, completed lease and sale transactions, space availabilities, and building profiles. As a leading tenant advisory firm, Thompson Hennessey & Partners provides an insider s perspective to assessing and fulfilling the needs of the occupiers of space. Thompson Hennessey & Partners breadth of experience is vital to its understanding of the market and to its ability to forecast cost and market trends. Matthew Troxell Director of Research mtroxell@thp-re.com 29 Congress, 7th Floor Boston, MA 22