BOSTON OFFICE MARKET. Inside... THIRD QUARTER 2017 OFFICESTATUS. »»Boston CBD bounces back. »»Two large companies to move headquarters into Boston.

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1 BOSTON OFFICE MARKET THIRD QUARTER 2017 OFFICESTATUS BOSTON COMMON BOSTON Inside...»»Boston CBD bounces back.»»two large companies to move headquarters into Boston.»»Natixis Global Asset Management opens new headquarters in Back Bay.»»Investment sales remain active.»»more than 360,000 sf delivered to market.»»facebook signs large lease in Cambridge.

2 BOSTON OFFICE MARKET THIRD QUARTER 2017 Strong Rebound for Greater Boston Office Market All Major Submarkets Post Positive Absorption Like it did a year ago, the Greater Boston office market produced a strong third quarter, establishing momentum for a solid close to The 186-million-square-foot office market experienced 744,000 square feet of positive absorption as vacancy dropped 0.4 percentage points to 12.0 percent. With more than 1 million square feet of positive absorption seen in 2017, it s clear that tenant activity has been vigorous. The average asking rent for Class A office space in Greater Boston continues to escalate, currently $44.96 per square foot, as the market remains strong and poised to carry its momentum into the final quarter of Many large tenant move-ins drove the Boston CBD market this quarter. Spearheaded by Natixis Global Asset Management s move into its new 150,000-square-foot headquarters at 888 Boylston St. in the Back Bay, tenants combined for 370,000 square feet of positive absorption, while vacancy decreased 0.5 percentage points to 8.9 percent, its lowest since Leasing activity was led by 121 Seaport in the Seaport District, with two noteworthy tenants in PTC and Alexion Pharmaceuticals committing to the entire building. Both companies will open new global headquarters with PTC occupying 250,000 square feet in the top half of the tower, while Alexion will take the remaining 150,000 square feet in the bottom half. The 74-million-square-foot office market in Boston CBD continues to get pricier, with Class A space quickly approaching $60 per square foot and Class B space in the low $40 s per square foot becoming more uncommon. Activity remained relatively stable in Cambridge. The 11-million-square-foot office market experienced 10,000 square feet of positive absorption alongside a drop in the vacancy rate by 0.1 percentage point to 4.0 percent. While the office inventory continues to decline slightly year over year, average asking rents show no signs of slowing down, now into the $68 per sf range. One of those companies financially stable enough to afford higher rental rates is Facebook, who signed a lease this quarter to open an office at 100 Binney Street in East Cambridge in 2018, the company s first large scale office location in Boston. The Suburban submarkets maintained momentum into the third quarter of The Route 128 and Interstate 495 markets experienced a drop in vacancy to 15.1 percent due to 350,000 square feet of positive absorption. Interstate 495 led the way with 281,000 square feet of positive absorption, as Route 128 contributed 69,000 square feet. Both submarkets continue to tighten as tenants decide to take their businesses to the slightly more affordable, yet convenient suburban markets. With an unemployment rate of 4.0 percent and hub of young, well educated, talented people, the Greater Boston area continues to perform at, or above, the level of many large metropolitan areas. As more and more established companies continue to move to their businesses to Boston, most recently GE and Alexion Pharmaceuticals, look for Greater Boston, and Massachusetts as a whole, to grow both economically and culturally. TRENDLINES 5-YEAR TREND RATES RENTAL RATE RBA CURRENT QUARTER 12.0% Vacancy Rates drop 0.4 percentage points +744k SF Positive Absorption in Q3 $44.96 PSF Average asking rents continue to rise 363K SF New inventory delivered in Q3 AVERAGE OFFICE SALE PRICE $315 PSF Average sale price dropped slightly OFFICE - USING EMPLOYMENT +3,284 jobs Job growth remained healthy this quarter 2 REAL ESTATE OUTLOOK BOSTON OFFICE MARKET Q3 2017

3 BOSTON Thousands SF Boston Market, Class A & B, Office 1, Absorption Qtrly Vacancy Rate 14.0% 12.0% 10.0% 8.0% 6.0% The 74-million-square-foot office market in Boston CBD positively absorbed 370,000 sf, as vacancy dropped 0.5 percentage points to 8.9 percent. The Back Bay led the way with 229,000 sf of positive absorption and a 1.6 percentage point drop in vacancy to 10.4 percent. Per Sq. Ft. 4.0% (200) 2.0% (400) 0.0% ASKING RENTS Back Bay vs Financial District, Class A, Office Back Bay Financial District $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 The most expensive product continues to exist in the Back Bay, currently $63.01 per sf for Class A office space, in comparison to $55.29 per sf in the Financial District and $58.50 per sf in the Seaport District. 121 Seaport is now fully leased, as PTC of Needham and Alexion Pharmaceuticals of New Haven, CT both inked big deals at the 420,000- sf building being built by Skanska in the Seaport District. Natixis Global Asset Management moved from 399 Boylston St. into its new 150,000 sf headquarters at 888 Boylston St., while America s Test Kitchen occupied 53,000 sf at the Innovation and Design Building where it will lease four floors. WeWork announced that it will open its fifth location in Greater Boston at 200 Portland St. near North Station in early Number of Blocks Boston Market, Class A & B, Office 20 to 50K sf in distinct properties Class A Class B Ashkenazy Acquisition Corporation bought One South Station from The Blackstone Group for $119 million (205,000 sf, $580/sf), while Morgan Stanley acquired 250 Summer St. in the Seaport District from Synergy Investments for $62.2 million (105,000 sf, $594/sf) Boston Office Market Indicators by Class Class A 46, % 9.0% $ % Class B 27, (202) -0.8% 8.7% $ % Boston Total 73, % 8.9% $ % 4QTR** REAL ESTATE OUTLOOK BOSTON OFFICE MARKET Q

4 BOSTON OFFICE MARKET THIRD QUARTER 2017 CAMBRIDGE The 11-million-square-foot office market in Cambridge continues to be tight, with only 4% vacancy on 10,000 sf of positive absorption this quarter. Average asking rents in East/Mid Cambridge escalate further, currently $77.41 per sf, with East Cambridge pushing mid to high $80 s per sf. Vacancy in the 7.2-million-square-foot office market in East Cambridge remained flat at 3.2 percent as a result of only 3,000 sf of positive absorption, while vacancy in Mid Cambridge has declined slightly over the past four quarters, currently back down to the fiveyear average level of 2.0 percent. Since 2004, the Cambridge office inventory has decreased 15.7 percent as a result of lab conversion. Facebook will open its first large scale office in Boston, occupying 133,000 sf at 100 Binney St. in Per Sq. Ft. Thousands SF Cambridge, Class A & B, Office Absorption Qtrly Vacancy Rate % % 8.0% % % % % 3.0% 2.0% (100) 1.0% (200) 0.0% ASKING RENTS Cambridge, Class A, Office East Mid West $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 While Boston is among many cities making a play for Amazon s new second headquarters, the 5.2 million-sf speculative development 250 North St. (North Point) is being considered by Boston executives as a potential fit for the blue-chip company. KBS Realty Advisors acquired 625 Mount Auburn St. from The Davis Companies for $44.5 million (137,000 sf, $325/sf). Number of Blocks Cambridge, Class A & B, Office 20 to 50K sf in distinct properties Class A Class B Cambridge Office Market Indicators by Class Class A 8,060 0 (23) (134) -1.7% 4.6% $ % Class B 2, % 2.2% $ % Cambridge Total 11, (133) -1.3% 4.0% $ % 4QTR** 4 REAL ESTATE OUTLOOK BOSTON OFFICE MARKET Q3 2017

5 ROUTE 128 Thousands SF Route 128, Class A & B, Office (200) Absorption Qtrly Vacancy Rate 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% After experiencing two consecutive down quarters, the Route 128 market bounced back in the third quarter, positively absorbing 69,000 sf while bringing vacancy down 0.2 percentage points to 12.9 percent. All three submarkets maintain vacancy rates lower than their five-year historical average, with 128 South at 11.2 percent vacant, 128 West at 11.3 percent vacant, and 128 North at 15.2 percent. (400) 0.0% The most expensive office space along Route 128 is in the West, with the Route 128 West Class A average asking rent flirting with $40 per sf. Per Sq. Ft. ASKING RENTS Route 128, Class A, Office $45.00 $40.00 $35.00 $30.00 $25.00 North West South SharkNinja moved into its recently constructed headquarters at 89 A St. in Needham, occupying 178,000 sf and establishing itself as part of the trio of anchors in the Founders Park Development, alongside TripAdvisor and NBCUniversal. while Steward Health Care also signed a lease in the building for 52,000 sf. $20.00 $15.00 $10.00 $5.00 $0.00 Significant deals executed in 128 West include National Grid at 404 Wyman St. in Waltham for 68,100 sf, Steward Health care at 89 A St. in Needham for 52,000 sf, and Dynatrace for 40,300 sf at 1601 Trapelo Rd. in Waltham. Number of Blocks Route 128, Class A & B, Office 20 to 50K sf in distinct properties Class A Class B Activity in Route 128 North and South include Charles River Development moving into their 23,000-sf expansion space at 7 New England Executive Park in Burlington, CCRC moving into 29,000 sf at 108 Myrtle St. in Quincy, and Honeywell Technologies signing at 105 Rosemont St. in Westwood for 16,500 sf The 204,000-sf office/lab building at Waltham Place (266 & 275 Second Ave.) was sold by Griffith Properties and Rockwood Capital to Alexandria Real Estate Equities for $71 million ($347/sf), while RJ Kelly Company bought the 525,000-sf portfolio at Cherry Hill Corporate Center in Danvers from Brookwood Financial Partners for $52.8 million ($100/sf). Route 128 Office Market Indicators by Class Class A 35, % 11.7% $ % Class B 27, (114) (19) -0.1% 14.4% $ % Route 128 Total 62, % 12.9% $ % 4QTR** REAL ESTATE OUTLOOK BOSTON OFFICE MARKET Q

6 BOSTON OFFICE MARKET THIRD QUARTER 2017 INTERSTATE 495 Interstate 495 extended its positive absorption streak to four quarters, absorbing 925,000 sf over that time, with 281,000 sf seen this quarter. I-495, Class A & B, Office Absorption Qtrly Vacancy Rate Of the 34.1 million sf existing in the I-495 market, 6.5 million sf are currently vacant, yielding a vacancy rate of 19.1 percent, which is 1.6 percentage points lower than the five-year-average. Thousands SF (100) (200) 23.0% 22.0% 21.0% 20.0% 19.0% 18.0% I-495 West led the charge with 397,000 sf of positive absorption, decreasing vacancy 2 full percentage points to 18 percent. (300) 17.0% Over the last twelve months, I-495 North has positively absorbed 440,000 sf as vacancy in the market has decreased from 24.6 percent to 21.3 percent. Physical Science Inc. expanded by 33,000 sf at 6 Riverside Dr. in Andover, while United Site Services took occupancy of 65,000 sf at 118 Flanders Rd. in Westborough, and ViaSat expanded by 20,000 sf at Marlborough Technology Park. Per Sq. Ft. ASKING RENTS I-495, Class A, Office North West South $23.00 $22.00 $21.00 $20.00 $19.00 $18.00 $17.00 $16.00 $15.00 revo Biologics signed a new deal for 39,000 sf at 200 Crossing Blvd. in Framingham, while Sonus Networks renewed its 98,000 sf at 5 Technology Park Dr. in Westford, agreeing to stay put for 10 more years. Normandy Real Estate Partners sold the office portfolio at Marlborough Technology Park to KS Partners for $46 million (572,000 sf, $80/sf). Number of Blocks I-495, Class A & B, Office 20 to 50K sf in distinct properties Class A Class B 10 I-495 Office Market Indicators by Class Class A 14,536 0 (59) % 15.6% $ % Class B 19, % 21.7% $ % I-495 Total 34, % 19.1% $ % 4QTR** 6 REAL ESTATE OUTLOOK BOSTON OFFICE MARKET Q3 2017

7 Greater Boston Office Market Indicators by Submarket Financial District 36, % 8.4% $ % Back Bay 14, % 10.4% $ % Longwood/Inner South 5,541 0 (49) (100) -2.0% 8.7% $ Seaport District 9, (65) -0.8% 10.1% $ % Charlestown 2,782 0 (62) % 5.5% $ Midtown 2, (67) -3.5% 13.3% $ North Station 2,391 0 (5) (60) -2.7% 5.8% $ South Station 1, % 3.9% - Boston Total 73, % 8.9% $ % East Cambridge/Kendall Square 7, (75) -1.1% 3.2% $ % Mid Cambridge/Harvard Square 2, (13) -0.6% 2.0% $ % West Cambridge/Alewife Station 1,666 0 (54) (46) -3.0% 9.9% $ % Cambridge Total 11, (133) -1.3% 4.0% $ % Inner North/Streetcar Suburbs 3, % 18.8% $ Suburban Submarkets (excl Cam) 100, , % 15.2% $ % Route 128 North 26,185 0 (26) % 15.2% $ % Route 128 West 23, (42) -0.2% 11.3% $ % Route 128 South 12, % 11.2% $ % Route 128 Total 62, % 12.9% $ % I-495 North 15, % 21.3% $ % I-495 West 16, % 18.0% $ % I-495 South 2,631 0 (135) (38) -1.7% 13.7% $ % I-495 Total 34, % 19.1% $ % Route 128 & I-495 Total 96, , % 15.1% $ % Greater Boston Market Total 186, , % 12.0% $ % CLASS A 4QTR*** Context: Vacancy Rate by Submarket Class A & B, Office 25% 2017 Q3 5Yr Average Vacancy Rate 20% 15% 10% 5% 0% 495 North 495 West 128 North 128 West 128 South Back Bay Financial District Seaport Cambridge REAL ESTATE OUTLOOK BOSTON OFFICE MARKET Q

8 METHODOLOGY The information in this report is the result of a compilation of information on office properties located in the Boston metropolitan area. This report includes single-tenant, multi-tenant office properties 20,000 sf and larger, excluding condo and medical office facilities and those properties owned and occupied by a user or government agency. CONTACT Chase Bourdelaise Director of Research, Northeast Region Chase.Bourdelaise@transwestern.com Tom Hovey Research Analyst Thomas.Hovey@transwestern.com 99 High Street, 30th Floor Boston, MA T F Copyright 2017 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.