GREATER BOSTON MARKET VIEWPOINT 4TH QUARTER Accelerating success.

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1 GREATER BOSTON MARKET VIEWPOINT 4TH QUARTER 2013 Accelerating success.

2 SF (Thousands) Boston Overview The Boston office market achieved a significant milestone during 2013, recovering all of the occupancy losses registered during the downturn, and pushing office occupancy to a historic high of 54.3 million square feet. With positive absorption of nearly 1.4 million square feet recorded over the course of the year, the vacancy rate dropped from 13.0% to 11.9%, with statistics in the core submarkets as follows: Submarket/Class Vacancy Rate Absorption (000s) Q YTD Financial District Class A 15.4% (16) (243) Financial District Class B 11.6% Back Bay Class A 7.1% Back Bay Class B 13.3% Seaport Class A 5.8% Seaport Class B 10.6% SUPPLY AND DEMAND Supply totals 61.6 million square feet, with nearly 90 percent of the inventory located in the Financial District, Back Bay and Seaport submarkets. Over half this inventory is in the Class A tower market that includes 41 buildings and totals 29.2 million square feet. The most notable addition to the skyline in 2013 was Liberty Mutual s 590,000-square-foot headquarter building at 157 Berkeley Street in the Back Bay. At the end of the fourth quarter, there were over 120 tenants in the market seeking an aggregate of over 3 million square feet of office space. Although the median requirement is 12,000 square feet, some of the larger requirements include: Tenant SF Industry BNY Mellon 350,000 Financial Services Putnam Investments 300,000 Financial Services Choate Hall & Stewart 175,000 Legal Analysis Group 150,000 Business Services Goodwin Procter and PwC signed the largest leases in 2013 for 360,000 and 330,000 square feet, respectively. PwC will occupy the first office building at Seaport Square when it relocates from the Financial District in Goodwin Procter s lease represents the fourth office building in the mixed-use Fan Pier development and it plans to relocate from 53 State Street in Selected 2013 transactions include: Tenant Address SF Submarket Goodwin Procter 2 Harbor Shore Drive 360,000 Seaport PwC 101 Seaport Boulevard 330,000 Seaport State Street Bank 1 Copley Place 135,000 Back Bay Wayfair 3 Copley Place 120,000 Back Bay Arnold Worldwide 10 Summer Street 115,000 Financial District Ernst & Young 200 Clarendon Street 100,000 Back Bay Goulston & Storrs 400 Atlantic Avenue 100,000 Financial District The Seaport comprises just over 10% of Boston s existing office supply but in the past three years has captured 20-30% of the city s lease transaction volume, including build-to-suit construction for companies including Vertex Pharmaceuticals, State Street Bank, Goodwin Procter and PwC. Office tenants of all sizes are now finding fewer options in this submarket which will increase in size by over one-third, to 9 million square feet by Signed lease activity since 2007 by submarket is depicted below: Transaction Velocity 7,000 6,000 5,000 4,000 3,000 2,000 Natixis Asset Management 125,000 Financial Services Childrens Hospital 100,000 Health Care/Medical VELOCITY 1, Financial District Back Bay Seaport Other Velocity (signed lease activity) totaled over 4 million square feet during 2013, representing approximately 175 transactions. Commitments pending at year-end represent an additional 400,000 square feet of leases. ABSORPTION AND VACANCY The vacancy rate declined from 13.0% to 11.9% during 2013 with 1.4 million square feet of positive absorption. p. 2 Colliers International

3 SF (Thousands) Positive absorption in the Back Bay and Seaport was due in part to the completion of Liberty Mutual s 590,000-square-foot headquarter building at 157 Berkeley Street and LogMeIn s 100,000-square-foot renovation of former brick-and-beam warehouse space at 320 Summer Street. Absorption has been positive for each of the past three years and the market has fully recovered from the contraction. Absorption will continue to trend positive in 2014 when Vertex relocates to its 1.1-million-square-foot headquarter facility in the Seaport during the first quarter. Over the course of the next two to three years the market should move closer to the equilibrium vacancy rate, generally believed to be around 10%. Projected Vacancy & Absorption 2,000 1,500 1, ,000-1,500-2,000 RENTAL RATES Total Boston Absorption % % 2017 Total Boston Vacancy Rate Rental rates are firming across the market, with the most notable increases in Class B buildings in the Seaport and for Class A space in the Back Bay. The spread between asking rents in various segments of the market is depicted in the following table. Space Type Rental Range/SF Class A High Rise $55 - $80 Class A Mid Rise $45 - $55 Class A Low Rise $40 - $45 Class B $30 - $45 20% 15% 10% 5% 0% DEVELOPMENT Build-to-suit construction is underway in the Seaport for State Street Bank (500,000 SF) at Channel Center, and PwC (330,000 SF) in the first office building at Seaport Square. Additionally, Goodwin Procter has leased 360,000 in what will be the fourth office building at Fan Pier. New England Development s office building at Pier Four has the potential to add an additional 350,000 square feet to inventory. In the Financial District, construction is underway at the Burnham Building, Millennium s 1.2-million-square foot mixeduse development at Downtown Crossing which is expected to include 220,000 square feet of office space. Arnold Worldwide has leased 125,000 square feet at the project and is expected to take occupancy by mid Speculative construction is underway at 1325 Boylston Street, Samuels & Associates mixed-use project in the Fenway submarket which will include 230,000 SF of office space. A myriad of additional projects are in the pipeline including One Congress Street (HYM Investment Group), 80 Causeway Street (Boston Properties/Delaware North), Boston Harbor Garage (The Chiafaro Company), 888 Boylston Street (Boston Properties), and 350 Boylston Street (Druker Company). TRENDS As the market edges closer to equilibrium, net absorption is expected to be strong over the next few years and rents will gradually increase. Users seeking large blocks of state-of-the-art, efficient space will explore build-to-suit opportunities. Out-of-market tenants will contribute to overall absorption as companies competing to recruit and retain talent are drawn to the urban core. Investor appetite for both Class A and Class B assets will remain strong. CONTACT: Mary Sullivan Kelly mary.kelly@colliers.com Colliers International p. 3

4 SF (Thousands) Cambridge Overview Cambridge was a tale of two markets in The office market, especially the core Kendall Square market, was incredibly tight with extremely low vacancies and rents rising to near record levels. On the other hand, the lab market, despite very strong transaction velocity, saw its vacancy rate jump by 8.5 percentage points by year-end. The overall vacancy rate in the Cambridge office and lab market increased from 10.5% to 13.4% during 2013, despite net positive absorption of 133,000 square feet. There was a sharp contrast in terms of performance between the two segments of the market during the year, with the office market recording over 700,000 square feet of positive absorption compared to net negative absorption in the lab market of nearly 600,000 square feet. In the fourth quarter alone, absorption in the lab market was negative 323,000 square feet due in part to Pfizer s consolidation from the Alewife submarket to Kendall Square and Vertex s planned departure from nearly 600,000 square feet in East Cambridge. Key statistics at the end of the fourth quarter include: Market Supply SF Vacancy Absorption (000s) (000s) Rate Q YTD Total Cambridge* 20, % (323) 133 Office 10, % Lab 8, % (702) (593) *Includes R&D space OFFICE MARKET Historical Vacancy & Absorption Cambridge Office % Absorption % % Vacancy 10.8% 9.0% % 20% 15% 10% 5% 0% The 10.9-million-square-foot Cambridge office market recorded 322,000 square feet of positive absorption during the fourth quarter, for a year-end total of 712,000 square feet. The completion of two build-to-suit buildings for Biogen at 225 Binney Street (307,000 SF) and 17 Cambridge Center (190,000 SF) were the largest contributors to the year s positive results. With its 2013 expansion, Biogen s total Kendall Square footprint spans seven buildings totaling approximately 1.4 million square feet. The three major groups that accounted for the bulk of the office transactions in 2013 were homegrown technology companies such as Akamai, HubSpot and Izotope; major West Coast technology firms such as Intuit, Twitter and Facebook; and finally, MIT that accounted for five leases totaling 90,000 square feet. Technology companies continue to flock to Kendall Square to tap into the deep talent pool and gain access to the resources and infrastructure surrounding MIT. Due to extremely low vacancy in the immediate Kendall Square area, landlords continue to push rents. The East Cambridge/Kendall Square submarket is extremely tight, with a 9.3% vacancy rate and 731,000 square feet of positive absorption during Tenants looking to open or expand in the 5-million-square-foot core Kendall Square market adjacent to the MIT campus have had few options as that micromarket reports a vacancy rate of less than 2%. The largest contiguous Class A available space in this market at year-end was a single floor measuring 21,000 square feet. Some of the largest office leases executed during 2013 are listed below: Tenant Address SF HubSpot 25 First Street 117,000 MIT Multiple Locations 90,000 Intuit 150 CambridgePark Drive 61,000 Akamai Technologies One Kendall Square, Building ,000 Twitter 141 Portland Street 47,600 Izotope 60 Hampshire Street 34,000 HubSpot s renewal and expansion into 117,000 square feet at 25 First Street represented the largest office transaction of This lease allowed the a marketing software developer founded in 2006 to more than double in size from its previous footprint of 57,000 square feet. p. 4 Colliers International

5 SF (Thousands) SF (Thousands) Following its acquisition of two Cambridge startups, Crashlytics and Bluefin Labs, Twitter leased three floors totaling 47,631 square feet at 141 Portland Street. This office will serve as Twitter s East Coast headquarters and will allow the social media company to dramatically grow its presence in Kendall Square. Demand for office space moderated somewhat toward year-end and there were 20 requirements totaling approximately 700,000 square feet headed into the first quarter A comparison of current asking rents compared to 12 and 24 months ago follows: Direct Asking Rents PSF Space Type - Location Q4 Q Q Class A East Cambridge $40 - $57 $45 - $65 $48 - $70 Class B East Cambridge $35 - $40 $38 - $48 $42 - $50 Class A Alewife $26 - $35 $28 - $35 $33 - $40 LAB MARKET Historical Vacancy & Absorption Cambridge Lab % % % 2010 Absorption 17.0% 11.0% 2012 Vacancy 19.5% % 15% 5% -5% -15% -25% The 8.8 million-square-foot lab market closed the year with a 19.5% vacancy rate, a considerable increase from the 11.0% rate recorded twelve months ago. The increase is due in large part to Vertex Pharmaceuticals vacating nearly 600,000 square feet in five buildings at the end of the fourth quarter. Although Vertex s departure has been anticipated since it signed its lease to relocate to two buildings at Boston s Fan Pier, it will take some time for the space to be absorbed. The spaces Vertex is vacating range from Class A existing lab space at 675 West Kendall Street to twenty-year old functionally obsolete space at 130 Waverly Street and 200 Sidney Street. Biomed Realty Trust will likely bring both 130 Waverly Street and 200 Sidney Street back to shell condition once Vertex s leases expire at the end of Three pharmaceutical companies that appeared poised just a year ago to make the transition from research to full-scale commercial successes by bringing potential blockbuster products to market stumbled in Product setbacks caused both Ironwood and AVEO to place a significant amount of space on the sublease market. Additionally, ARIAD Pharmaceuticals was forced to lay off a significant number of its staff after the safety and viability of its lead drug Iclusig was called into question. It is now unclear whether the company will ever occupy the 386,000 square feet leased in two buildings currently under construction at 75 and 125 Binney Street. Despite this negative news and spike in the vacancy rate, transaction velocity was very strong in 2013 with 30 leases signed for a total of 1.2 million square feet. Over 1 million square feet of this velocity came in the form of new leases and represented a healthy balance between Big Pharma/Big Bio and emerging homegrown companies. This demand from early-stage venture-backed life science companies, which had been virtually nonexistent in the first half of the year, picked up significantly in the latter half of the year. Biotech Transaction Velocity 1,600 1,400 1,200 1, New Lease Renewal , ,061 ModeRNA Therapeutics was one of the most active early-stage life science companies in 2013 as it signed partnerships with AstraZeneca and Alexion Pharmaceuticals. These partnerships brought the company $365 million in upfront payments and allowed ModeRNA to sign two leases for a total of 87,434 square feet. These leases represent over 70,000 square feet of growth CONTACT: Mary Sullivan Kelly mary.kelly@colliers.com Colliers International p. 5

6 Cambridge Overview Millennium: The Takeda Oncology Company signed a 229,000-square-foot lease with Forest City Enterprises for a build-to-suit research facility at 300 Massachusetts Avenue within University Park at MIT. This lease represented the largest lab lease signed in The new building will be a significant addition to Millennium s existing footprint within University Park at MIT which is currently 567,000 square feet in four buildings. Construction is expected to be completed in the second quarter of The largest lab leases executed during the year include: Tenant Address SF Millennium Pharmaceuticals 300 Massachusetts Avenue 229,000 ARIAD Pharmaceuticals 75/125 Binney Street (e) 142,000 Novartis 700 Main Street 100,000 ModeRNA Therapeutics 200 Technology Square/ 87, Bent Street Ipsen Biomeasure 675 West Kendall Street 62,600 Foundation Medicine 150 Second Street 61,600 Genzyme 64 Sidney Street (r) 58,900 (e) expansion (r) renewal Of the 1.7 million square feet of available lab space in Cambridge, 1 million is offered on a direct basis and 700,000 square feet is offered on a sublease basis with varying lengths of remaining term. At the end of the fourth quarter, there was a marked increase in the availability of Class A space due to the Vertex space becoming available. Close to half the available space at year-end represents existing Class A lab space, a significant increase compared to the end of last year when Class A availability represented 15% of the total and much of the available space was in shell condition. A breakdown of options by type and quality follows: Space Type SF Available % of Available Space # Buildings Class A Biotech-Ready Shell 347,644 20% 5 Class A Existing Lab 851,019 49% 9 Class B Existing Lab 435,313 25% 15 Obsolete Lab 87,129 5% 3 Totals 1,721, % 32 With very tight capital markets of recent years, the public markets came to life in 2013 and six Cambridge-based life science companies successfully completed IPOs. These include BIND Therapeutics, Foundation Medicine, Epizyme, Acceleron, Agios, and bluebird bio. In late-december, two others Eleven Biotherapeutics and Genocea Biosciences announced their intention to go public. The stock market success of these companies is also boosting interest among venture firms to invest more in young biotechs. At year-end there were 20 requirements totaling approximately 600,000 square feet, ranging from 5,000 to 150,000 square feet in size. TRENDS Due to the lack of space available in the core Kendall Square market East Cambridge office rents will continue to increase. Despite the vacancy spike the lab market experienced in 2013, rental rates for quality well-located lab space will hold firm. Inferior product or space in secondary locations will be more likely to see downward pressure on rents. p. 6 Colliers International

7 Suburban Overview Slow and steady is the name of the game in the suburban Boston office and R&D markets. The vacancy rate declined slightly during 2013, ending the year at 19.8%, as several buildto-suit expansions bolstered net absorption. Despite a mixedbag of results in the fourth quarter highly-amenitized suburban locations offering a dynamic live, work, play environment remain desirable among prospective tenants. More infill locations such as Somerville and Brighton as well as Core Route 128 are active as these areas maintain sizable cost savings compared to the metro s urban core. With vacancies tightening in areas inside the Route 128 belt, tenants (especially large users) may be faced with fewer space options in the coming year driving up rents and pushing demand further into the metro west. Aggregate statistics for the office and R&D market are provided below: Market/Submarket Supply SF Vacancy Absorption (000s) (000s) Rate Q YTD Suburban Boston 133, % (57) 774 Inner Suburbs 5, % 31 (1) Route , % Route , % (107) 420 Worcester 2, % 9 56 SUPPLY AND DEMAND The suburban office and R&D market totals close to 134 million square feet, with performance and product varying from one submarket to the next. Class A properties comprise 31% of the market, with a majority (close to 70%) of this highend office space located along Route 128. Continued growth in the tech and biotech industries in greater Boston helped to drive the suburban recovery in 2013, and several medical, computer software, and biotech companies are actively looking for space. Firms in business and financial services, retail and insurance are in the market as well. There are 245 tenants, representing roughly 7.6 million square feet with active suburban requirements. The median size requirement is just 10,000 square feet, indicating smaller transactions will drive leasing in the near term. However, some of the more sizeable tenants in the market with potential requirements over the next 12 to 24 months include: Tenant SF Industry Target Market Hologic 400,000 Medical Devices Route 495 West MKS Instruments 300,000 Medical Devices Route 495 North GE Healthcare 250,000 Health Care/Medical Route 495 West Boston Financial Data Services 200,000 Financial Services Route 128 South Clarks Shoes 180,000 Retail Apparel VELOCITY Route 128 Mass Pike/ Route 128 South/ Route 128 Northwest Healthcare and technology firms dominated expansions across all suburban submarkets this quarter. Cavium (42,163 square feet) and IEP Technologies (31,800 square feet) leased space in Marlborough, while Nuance Technology expanded into approximately 46,000 square feet being subleased by Nokia at 15 Wayside Drive, Burlington. Healthcaresource also inked a deal at 100 Trade Center Avenue, Woburn. New England Research completed a lease at 480 Pleasant Street in Watertown and UniQure BioPharma took down an additional 53,000 square feet at 113 Hartwell Avenue, Lexington. Regardless of this solid leasing momentum, a number of contractions and consolidations took place in the fourth quarter. Despite expanding by 166,000 square feet at its Apple Hill Campus, MathWorks purchased the 500,000-square-foot One Boston Scientific Place and is only occupying half of the building resulting in net negative absorption of 114,000 square feet for Natick. TJX finally relocated its employees from 118 Flanders Road, Westborough to its new campus in Marlborough in October leaving 129,000 square feet of vacant space. Waltham and Woburn also saw a rash of moveouts this quarter. In Waltham, Battery and Castille Ventures (31,000 square feet) at 930 Winter Street and Kenexa (64,300 square feet) at 343 Winter Street both left space on the market. In Woburn, Varian Associates vacated more than 30,000 square feet of space at 12 Cabot Road while Life Technologies and USI Consulting Group put close to 60,000 square feet of space on the market at 12 Gill Street. CONTACT: Mary Sullivan Kelly mary.kelly@colliers.com Colliers International p. 7

8 SF (Thousands) Suburban Overview After four quarters of positive absorption, the recovery is in full swing in the Route 128 South submarket. After talks of relocating to Westwood, Dunkin Brands renewed its 175,000-square-foot lease at 130 Royall Street, Canton for another 16 years. Several small-to-mid sized leases were also signed here in the fourth quarter. Best Doctors opened an office at 1250 Hancock Street, Quincy (while maintaining a presence at 100 Federal Street, Boston). More than 45,000 square feet transacted at the Braintree Hill Office Park, with Madavor Media and others leasing space here. Some of the larger transactions executed during the quarter included: Tenant Address SF Dunkin Brands (r) 130 Royall Street, Canton 175,000 Monster.com (c) 133 Boston Post Road, Weston 175,000 Cynosure (e) 5 Carlisle Road, Westford 144,000 IDC Communications 492 Old Connecticut Path, Framingham 92,000 Global Petroleum (e) 800 South Street, Waltham 72,174 Best Doctors (e) 1250 Hancock Street, Quincy 48,675 (r) = renewal (e) = expansion (c) = contraction ABSORPTION AND VACANCY Historical Vacancy & Absorption Office and R&D 4,000 3,000 2,000 1, , % 20% 15% 10% 5% 0% Build-to-suit construction continues to prop up net absorption. Following on the heels of Red Hat Inc., and Keurig, MathWorks recently completed construction on its 166,000-squarefoot addition at 4 Apple Hill, Natick in the fourth quarter and has plans to expand its secondary campus also in Natick. PerkinElmer increased its footprint at 68 Elm Street, Hopkinton by more than 40,000 square feet, which now totals roughly 85,000 square feet. Although the construction pipeline has slowed, there are a handful of other corporate expansion projects currently underway. TripAdvisor, Schneider Electric, Keurig, and New Balance will all be adding space to the suburban market over the next months. There is still some push and pull in the Route 128 submarkets and overall vacancies saw no significant movement in Strong leasing still exists in Waltham, Wellesley, Needham and Newton, and tenants are beginning to branch out beyond these major office nodes driving leasing in Quincy, Braintree and Lexington. Yet negative absorption persists in the northern submarkets. Look for a more positive outlook in 2014, as large contiguous blocks of available space will be harder to come by and construction remains subdued. At the end of 2013, vacancies in the Route 495 submarkets were 60 basis points below year-ago levels. Though absorption was more robust during the first half of the year, leasing velocity is still solid and a handful of large office-users are actively looking for new space in the Route 495 West and North submarkets. Price-sensitive firms and companies with large lease requirements will boost office demand here going forward. That being said, sentiment is shifting and tenants will remain attracted to newer, more modern, amenity-rich spaces. -2,000-3,000-4,000 Class A Class B Class A Vacancy Class B Vacancy The suburban office and R&D markets recorded almost 800,000 square feet of absorption in 2013, falling just shy of last year s total of nearly one million square feet. Net absorption was spread almost evenly among the Class A and B markets, allowing modest vacancy declines in both property classes over the past year. p. 8 Colliers International

9 $/SF OFFICE RENTAL RATES Comparative Asking Rents Class A and B $40 $35 $30 $25 $20 $15 $10 $5 $0 Q Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Needham Newton Waltham Wellesley Lease rates are on an upward trajectory in the suburban markets, with three consecutive quarters of growth now on the books. On average, weighted average rents are up slightly since bottoming in the first quarter of 2013, with much of the more recent growth attributed to more aggressive underwriting by new building owners, who have been pushing rents in anticipation of positive fundamentals. Pricing remains frothy in certain areas, especially among towns in the Route 128 Mass Pike submarket. Pockets of outsized rents can be found in Wellesley, Waltham, Newton and Burlington, as recent leasing proposals at select properties have been aggressively quoted. For reference, Riverside Center in Newton is quoting rents of $40 per square foot. Additionally, certain segments of the Burlington market are seeing lease rates in the low $30s per square foot. Landlords in Waltham and Wellesley, however, are driving up pricing with a few select properties in these towns quoting rents in the mid-$40s per square foot. TRENDS With more than 60% of the metro s office inventory located in the suburbs, the vacancy rate is slower to move than the Boston or Cambridge markets, and is expected to decline marginally in the coming quarters. Tenant expansions, in the form of build-to-suit construction, will support suburban office absorption in the coming year. Look for more relocations and expansions in the core Route 128 Mass Pike submarket. As the market tightens, the recovery in less central locations should take hold. Rent growth is permeating the suburban market, and landlords should continue to see more broad-based improvements in lease rates over the next few quarters. In addition to the economics of rent per square foot, tenants seek value through efficiency, amenities and sustainability. CONTACT: Mary Sullivan Kelly mary.kelly@colliers.com Colliers International p. 9

10 Billions Capital Markets Aggregate 2013 investment sale volume for Greater Boston was the highest level since Total volume increased by roughly 50%, from $4.5 billion in 2012 to $6.4 billion in 2013, and the uptick in volume was evident across all property types. Suburban office was the big winner, representing $2.3 billion of total sales, and a 66% increase over the prior year. Industrial, perennially a slower asset class in this market had a spectacular year with $760 million in sales, nearly double its five-year average. There continues to be an abundance of capital seeking Greater Boston real estate and this enormous demand outstrips the supply of new investment offerings. Total Sales Volume by Sector $3.0 BOSTON CBD The Boston office market ended 2013 on a strong note with exceptional pricing in the Seaport District and Financial District. The headline fourth quarter transaction was Norges Bank s purchase of a 47.5% interest in One Financial Center for $238 million of equity and assumption of $240 million of CMBS debt ($774 per square foot basis) from Beacon Capital. The accelerated pricing correlates directly with the rapid improvement in Class B leasing fundamentals, as well as stillcompressing cap rates due to the competition among aggressive buyers. Class B Transactions $2.5 $2.0 $1.5 $1.0 $0.5 $ Apartment Industrial Retail Suburban Office CBD Office Blackstone s on-going exit from the Boston market is having a profound effect. In 2013, Blackstone was responsible for 30% of all CBD office transactions, and 37% of all suburban office sales. The private equity firm purchased the multi-market Equity Office portfolio in 2007 for $39 billion, including approximately $4.5 billion in Boston, Cambridge and suburban Boston properties. Blackstone s general objective is to buy, fix problems to create value, and then sell, and has made a fortune timing markets. Rather than taking the Equity Office operating platform public or undertaking a national portfolio sale, Blackstone opted for an asset-by-asset auction process. The result has been a torrent of sales of some of this market s best real estate, record-breaking pricing and, ultimately a diversification of landlords within the Class A market. Clearly Blackstone believes the intersection of accelerating leasing fundamentals and interest rates potentially on the rise from historic lows indicated an optimal time to sell. The year-over-year acceleration in pricing is summarized below: CBD Office Average Price PSF $350 $379 Average Cap Rate 6.0% 5.5% Suburban Office Average Price PSF $168 $179 Average Cap Rate 7.8% 7.0% (Clockwise from left: One Liberty Square, 51 Sleeper Street, One Washington Mall, Center Plaza) Property Price/SF Buyer Center Plaza $420 Shorenstein One Washington Mall $401 Georgetown 51 Sleeper Street $399 TIAA-CREF One Liberty Square $389 Clarion SUBURBS The suburban markets continue to benefit from core buyers seeking the better investment yields that can be achieved in super prime submarkets. As institutional capital turned to the suburban sector in the second half of last year and pricing picked up, sellers took note and joined in. However there remains a substantial divide between core and non-core suburban office markets with a dramatic drop-off in investor interest and pricing in the outer suburbs. Of the $2.6 billion in suburban office investment, a mere $138 million was outside of Route 128. INDUSTRIAL The industrial sector posted $759 million in total sales volume during the year, representing the sector s biggest year since A notable nationwide portfolio traded during the fourth quarter when Liberty Property Trust acquired 176 properties totaling 22.8 million square feet from Cabot Properties for $1.475 p. 10 Colliers International

11 billion or $64.51/SF). Five Boston area assets totaling just over 408,000 square feet were included in the trade: 20 Liberty Way and 101 Constitution Boulevard, Franklin, 10 Cornell Place and 265 Ballardvale Street, Wilmington, and 13 Centennial Drive, Peabody. Selected fourth quarter transactions include: Boston Office Address Buyer Seller Price Size $/SF Center Plaza Shorenstein The Blackstone Group $305,000, ,000 $ Sleeper Street TIAA-CREF DivcoWest $60,200, ,000 $399 One Washington Mall Georgetown Company AEW & Saracen $56,730, ,321 $ Portland Street The Winhall Companies Synergy Investments $7,400,000 30,048 $246 Suburban Office Address Buyer Seller Price Size $/SF Wellesley Office Park Manulife Financial The Blackstone Group $237,000, ,135 $ First Street, Cambridge Jamestown Properties The Blackstone Group $195,000, ,000 $ Brookline Place, Brookline Clarion Partners Invesco Realty Advisers, Inc. $121,000, ,000 $ Second Street, Cambridge Alexandria Real Estate Equities Skanska $94,500, ,000 $768 1 & 3 Burlington Woods Drive, Burlington Griffith Properties jv Artemis Real Estate Partners Colony Realty Partners $61,000, ,828 $ South Bedford Street, Burlington R.J.Kelly Co. The Blackstone Group $30,000, ,576 $208 Industrial Address Buyer Seller Price Size $/SF National Portfolio - 5 Greater Boston Properties Liberty Property Trust Cabot Properties $26,300, ,356 $65 9 Stuart Road, Chelmsford Jumbo Capital Chelmsford Crown Holdings $10,755, ,000 $ Research Drive Wilmington Tech Park #2 Chestnut Realty Partners RREEF America REIT III Corp $10,485, ,340 $96 Multifamily Address Buyer Seller Price Units $/Unit 1 Arboretum Way, Burlington Avalonbay Communities, Inc. AEW Capital Management $79,850, $255,929 7 Archstone Circle, Reading JPMorgan Asset Management 11 Oak Street, Wellesley Universal Properties Retail Henderson Global Investors (North America), Inc. Boston Residential Group, LLC jv Eastern Real Estate LLC $63,100, $309,314 $25,600, $400,000 Address Buyer Seller Price SF $/SF Back Bay Portfolio ASB Real Estate Investments Frazer Newbury Holdings LP $91,200,000 51,249 $1, Newbury Street, Boston Urban Meritage Newbury RB LLC $10,100,000 8,994 $1,123 Hotel Address Buyer Seller Price SF $/Room 300 Presidential Way, Woburn Pyramid Hotel Group LLC National Development $27,000, $181,208 1 Remington Street, Cambridge De. Gerald L Chan Veritas at Harvard Square LLC $13,000, $419,355 CONTACT: Mary Sullivan Kelly mary.kelly@colliers.com Colliers International p. 11

12 Market Snapshot Q STATISTICS OFFICE/R&D MARKET SQUARE FEET (SF) SUPPLY DIRECT SF AVAILABLE SUBLEASE SF AVAILABLE VACANCY* Q ABSORPTION YTD ABSORPTION BOSTON 61,587,701 6,516, , % 164,059 1,399,985 Back Bay 12,682, , , % 89, ,560 Financial District 33,599,226 4,430, , % 53, ,724 Charlestown 2,843, ,150 21, % (6,886) 41,162 Crosstown 1,025,000 14, % 7,753 27,740 Fenway/Kenmore 1,826, , % 1,606 15,646 North Station 1,863,372 66,248 5, % 52,443 88,013 Seaport 6,563, ,468 81, % 74, ,399 South Station 1,184, ,664 23, % (108,428) (52,259) CAMBRIDGE 20,690,984 1,789, , % (322,601) 133,417 Alewife Station/Route 2 2,753, , , % (275,638) (388,929) East Cambridge 16,011,815 1,264, , % (44,713) 474,430 Harvard Square/Mass Ave 1,926,146 51, % (2,250) 47,916 SUBURBS 133,965,764 23,395,580 3,107, % (57,367) 774,003 Inner Suburbs 5,816, , , % 30,796 (972) Route 128 North 8,276,548 1,392, , % 40,056 (79,993) Route 128 Northwest 23,122,996 3,299, , % (131,402) (324,405) Route 128 Mass Pike 30,202,253 4,048, , % (82,558) 394,622 Route 128 South 15,436,303 2,946,967 75, % 183, ,032 Route 495 North 26,101,036 5,714, , % 25,200 48,725 Route 495 West 18,395,828 4,344, , % (115,197) 269,123 Route 495 South 4,599, ,582 45, % (17,331) 101,654 Worcester 2,015, ,545 36, % 9,179 56,217 TOTAL 216,244,449 31,701,962 4,871, % (215,909) 2,307,405 *Including sublease space CONTACT: Mary Sullivan Kelly Senior Vice President & Chief Research Officer DIR FAX mary.kelly@colliers.com To be placed on our mailing list, please visit The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. This publication is the copyrighted property of Colliers International and/or its licensor(s) Colliers International. All rights reserved. Colliers International 160 Federal Street Boston, MA,