ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICE MARKET REPORT

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1 ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICE MARKET REPORT THIRD QUARTER 2018

2 AMENITY RICH LOCATIONS & ASSETS STEAL DEMAND Greater Boston s suburban office and lab market encompasses over 125 million square feet and consist of eight major submarkets concentrated along Route 128 and Interstate 495. Immense pressure across the Boston and Cambridge markets has caused tenants to consider suburban locations for rent relief and future growth opportunities. Most recently, the demand for lab space has begun to gain significant momentum across the suburbs. Markets with existing critical mass including Waltham, Lexington and Watertown are the preferred locations. Looking forward, strong regional macroeconomic indicators coupled with strengthening regional demographics have the Greater Boston suburban real estate market positioned for future growth. Over the next 12 months, watch as both investors and tenants acknowledge the growing spread between Downtown and suburban pricing/ yields and how the market will adjust accordingly. # 3.6% AUGUST MASSACHUSETTS UNEMPLOYMENT 3.6% AUGUST NATIONAL UNEMPLOYMENT # $5.2B MA YTD (AUG 18) VC FUNDING 2 ND NATIONALLY IN YTD (AUG 18) VC FUNDING

3 MARKET TRENDS CLASS A ASKING RATE VS. DIRECT VACANCY $ % VACANCY RATE TO 12.0% Strong demand across submarkets as relief for Downtown/Cambridge $28.50 $27.00 $ % 18.0% 16.0% CONTEMPORARY UPGRADES Landlords must adapt and keep common areas & lobbies fresh $24.00 $22.50 $21.00 $ % 12.0% 10.0% 8.0% CREATING A SENSE OF PLACE $ Average Asking Rate Direct Vacancy (%) YTD % Open layouts, collaborative environments & unique amenities LOCATION IS NOT FORGOTTEN Highway access, public transit & parking remain paramount CLASS B ASKING RATE VS. DIRECT VACANCY TENANTS FAVOR CREATIVE OFFICE Creating the Downtown feel in a suburban setting $24.00 $23.00 $22.00 $ % 19.0% 18.0% 17.0% INVESTMENT SALES REBOUND $20.00 $ % 15.0% Watch for a busy year in the suburbs $ % ASKING RATES RISE AGAIN Inner suburban markets accelerate growth, outer markets steady $17.00 $ Average Asking Rate Direct Vacancy (%) YTD % 12.0%

4 DIRECT VACANCY RATE BY SUBMARKET Route 2 West 495 Northeast Mass Pike 128 South 128 North Inner Suburbs 128 West 495 South Route 3 North 0.0% 4.0% 8.0% 12.0% 16.0% 20.0%

5 SUBMARKET AVERAGE ASKING RATES Rte-2 West $19.98/SF Rte-3 North $21.51/SF 495 North $20.11/SF 128 North $27.44/SF 128 West $33.07/SF I-495/Mass Pike $21.14/SF 128 South $22.71/SF 495 South $19.96/SF

6 CLASS A & B OFFICE ROUTE 128

7 While most would categorize urbanization as the dominant trend for the past 3-5 years, not all tenants are pursuing urban migration and in fact many prefer the extra space, cost savings and reduced congestion that the suburbs offer in comparison to Downtown locations. That being said, the younger millennial workforce favor the conveniences of cities (restaurants, bars, coffee shops, outdoor seating, etc.) and suburban assets with these amenities located on-site or nearby are out performing the general market. Once again, the suburban lab market posted a busy quarter, largely the result of non-existent availability in Cambridge & Boston.In Waltham, the redeveloped former post office, now known as The POST, has reportedly secured two more large tenants. Boston Dynamics will occupy roughly 200,000 square feet while ElevateBio will separately lease approximately 100,000 square feet. In addition, Zoom Info signed a 73,500 square foot at 170 Tracer Lane where the company will open its new headquarters for 450 employees in early The Waltham office market also posted a strong quarter with Cambridge Savings Bank signing the largest quarterly deal for 76,000 square feet at 81 Wyman Street. Cambridge Savings Bank will be consolidating back office operations from locations in Cambridge and Arlington into its new Wyman Street location. Activity remained strong across the northern suburbs as well with C4 Analytics relocating from Saugus into 40,500 square feet at 701 Edgewater Drive in Wakefield. The new location will serve as the company s headquarters. In Wilmington, Sovos signed an 8-year lease extension at 200 Ballardvale Street where the global software provider will completely overhaul their 50,000 square feet suite into a state-of-the-art space. The investment sales market flexed its strength this quarter with two large deals exemplifying current market conditions. In Watertown, The Linx, a fully repositioned and 100% leased lab facility was purchased by Clarion Partners for $851 PSF. Similarly, after undergoing an extensive transformation into a creative office property, 89 A Street, the home of Shark Ninja and Steward Healthcare, sold to MET Life for $389 PSF. 10.3% DIRECT VACANCY 1.9% SUBLEASE AVAILABILITY 14.5% TOTAL AVAILABILITY # 276,900 SF 12-MONTH ABSORPTION # $28.44/SF AVERAGE ASKING RATE

8 CLASS A & B OFFICE/LAB ROUTE 128 NOTABLE RECENT LEASES ADDRESS TOWN SUBMARKET TENANT SF 200 Smith Street Waltham 128 West Boston Dynamics 200, Smith Street Waltham 128 West ElevateBio* 100, Wyman Street Waltham 128 West Cambridge Savings Bank 76, Tracer Lane Waltham 128 West Zoom Info 73, Ballardvale Wilmington 128 North Sovos 50, Second Ave Needham 128 West Brigham & Women's 47, Worcester Street Wellesley 128 West Morgan Stanley 42, Edgewater Wakefield 128 North C4 Analytics 42, Rivers Ridge Norwood 128 South Corbus Pharmaceuticals* 32, Summit Drive Burlington 128 North Work Bar 20,500 One Newton Newton 128 West Lumacell 20, Grossman Drive Braintree 128 South The Boston Herald 13, Worcester Street Wellesley 128 West Wellesley Bank 11, Worcester Street Wellesley 128 West Global Advanced Metal 5,000 *lab transaction AVERAGE ASKING RATE BY SUBMARKET AVERAGE DIRECT VACANCY BY SUBMARKET $ % $ % $ % $ % $ % $ % $ % $ % $ YTD % YTD2018 West South North

9 RECENT INVESTMENT SALES 89 A Street Needham 490 Arsenal Street Watertown 825 Washington St Norwood 720 University Ave Norwood 490 Arsenal Street, Watertown $157,567,600 ($851/RSF) Buyer: Clarion Partners 89 A Street, Needham $96,500,000 ($389/RSF) Buyer: MetLife 825 Washington Street, Norwood $23,500,000 ($255/RSF) Buyer: Thor Equities 720 University Avenue, Norwood $8,500,000 ($113/RSF) Buyer: Hilco RE

10 CLASS A & B OFFICE INTERSTATE 495

11 Quarterly performances were mixed across I-495 s submarkets with the net result leading to just over 186,000 square feet of net positive quarterly absorption, which lowered the average vacancy rate 20 basis points to 14.7%. Generally speaking, there are specific micro markets within I-495 s submarkets which tend to outperform market averages. More specifically, buildings must be well located along major roadways with easy access to highways and strategic interchanges. The Route 3 North corridor, which houses some of I-495 s premier technology & defense tenants, recorded strong quarterly activity in Bedford and Billerica. ClearMotion announced it will move its corporate headquarters from Woburn to a currently vacant 122,000 square foot office R&D building at 805 Middlesex Turnpike in Billerica. After an extensive market tour, Novanta ultimately decided to renew its 147,400 square foot lease at 125 Middlesex Turnpike in Bedford. One of I-495 s larger annual lab transactions was signed in Framingham this quarter when Replimune Group committed to 63,300 square feet at 33 New York Avenue where local lab development ace s King Street Properties are converting an existing facility into modern lab space equipped with all the latest bells and whistles. The move is notable for the I-495 Mass Pike submarket with both the quality of tenant and landlord speaking to the viability and hopefully enduring strength of the suburban lab market. The forecast for the Interstate 495 market remains bright particularly as interior suburban locations become more congested and expensive. Across the board, tenants are more real estate conscience than ever before and face the challenge of keeping costs in check while cultivating corporate culture that retains and attracts top talent. $ 14.7% DIRECT VACANCY $ 1.5% SUBLEASE AVAILABILITY $ 18.9% TOTAL AVAILABILITY # 259,350 SF 12-MONTH ABSORPTION # $20.76/SF AVERAGE ASKING RATE

12 CLASS A & B OFFICE INTERSTATE 495 NOTABLE RECENT LEASES ADDRESS TOWN SUBMARKET TENANT SF 125 Middlesex Turnpike Bedford Route 3 North Novanta 147, Middlesex Avenue Billerica Route 3 North ClearMotion 122, New York Avenue Framingham 495 Mass Pike Replimune Group* 63, Forest Street Marlborough 495 Mass Pike Advanced Math 47, Littleton Road Westford Route 3 North MedAcuity + Carnegie Dartlet 38, New England Business Andover 495 Northeast Infineon Technologies 22, Computer Drive Westborough 495 Mass Pike Northwestern Mutual 8, Turnpike Road Southborough 495 Mass Pike Alliance Health 7, West Park Drive Westborough 495 Mass Pike MAPFRE Insurance 5, West Park Drive Westborough 495 Mass Pike Legacy Financial Advisors 4, Computer Drive Westborough 495 Mass Pike Tesla Energy Operation 4,300 *lab transaction AVERAGE ASKING RATE BY SUBMARKET AVERAGE DIRECT VACANCY BY SUBMARKET $ % $ % $ % $ % $ % $ % $ % $ % $ YTD % YTD2018 Northeast South Mass Pike

13 RECENT INVESTMENT SALES 293 Boston Post Road Marlborough 15 Shattuck Road Andover 959 Concord Street Framingham 463 Worcester Street Framingham 293 Boston Post Road, Marlborough $16,400,000 ($86/RSF) Buyer: KS Partners 15 Shattuck Road, Andover $15,000,000 ($162/RSF) Buyer: Menlo Equities 959 Concord Street, Framingham $13,300,000 ($176/RSF) Buyer: Casey & Hayes 463 Worcester Road, Framingham $5,250,000 ($126/RSF) Buyer: A&E Fire Protection

14 OFFICE REPORT STATS

15 Office TOTAL A&B Total Inventory (SF) Direct Vacancy Sublease Availability Total Availability Quarterly Absorption (SF) 12 Month Absorption (SF) Average Asking Rate Inner Suburbs 5,033, % 2.1% 16.8% (26,250) 85,050 $38.02 ROUTE ,859, % 1.9% 14.5% 506, ,950 $ West 24,692, % 2.9% 13.8% 98, ,400 $ North 18,401, % 1.1% 13.1% 225, ,350 $ South 16,764, % 1.5% 17.0% 182,350 (141,800) $22.71 INTERSTATE ,364, % 1.5% 18.9% 186, ,050 $ Mass Pike West 19,041, % 2.1% 21.0% (4,850) (112,300) $ Route 2 West 6,609, % 0.8% 23.2% (30,850) 20,1450 $ Northeast 5,721, % 1.6% 19.6% 4,650 64,800 $20.11 Route 3 North 6,718, % 1.5% 11.5% 72,800 37,650 $ South 4,272, % 0.2% 13.8% 144, ,750 $19.96 CLASS A TOTAL 107,256, % 1.8% 16.4% 666, ,050 $25.86 Inner Suburbs 2,751, % 3.6% 18.4% (12,950) 57,450 $38.79 ROUTE ,953, % 2.1% 14.8% 325, ,450 $ West 15,180, % 3.6% 14.2% 13, ,250 $ North 12,145, % 1.2% 13.2% 134, ,200 $ South 9,627, % 1.0% 17.9% 176,850 (186,950) $24.79 INTERSTATE ,709, % 2.5% 18.3% 56,300 (74,700) $ Mass Pike West 11,595, % 3.0% 21.3% (7,150) (137,950) $ Route 2 West 2,649, % 1.9% 13.9% (14,550) (31,200) $ Northeast 3,173, % 2.6% 23.9% (33,450) (46,800) $21.00 Route 3 North 3,699, % 2.3% 8.8% 3,950 38,050 $ South 1,591, % 0.0% 14.5% 107, ,250 $20.33 CLASS B TOTAL 62,414, % 2.3% 16.2% 368, ,250 $28.59 Inner Suburbs 2,282, % 0.4% 14.8% (13,350) 27,550 $37.36 ROUTE ,905, % 1.6% 14.0% 181,400 38,450 $ West 9,512, % 1.7% 13.3% 85,450 11,150 $ North 6,256, % 0.8% 12.8% 90,450 (17,850) $ South 7,137, % 2.1% 15.9% 5,550 45,150 $21.19 INTERSTATE ,654, % 0.4% 19.7% 129, ,750 $ Mass Pike West 7,446, % 0.7% 20.7% 2,350 25,650 $ Route 2 West 3,960, % 0.0% 29.4% (16,350) 51,350 $ Northeast 2,548, % 0.3% 14.2% 38, ,650 $18.57 Route 3 North 3,018, % 0.5% 14.9% 68,850 (400) $ South 2,680, % 0.4% 13.4% 37, ,550 $19.88 TOTAL 44,842, % 1.0% 16.5% 298, ,750 $23.29

16 ETHAN ROBERT Director of Research O: CONNOR MALONEY Analyst Lincoln Property Company 53 State Street, 8th Floor, Boston, MA LPCBoston.com Lincoln Property Company s Boston Office Report is produced by the Boston Office s research team in collaboration with our Suburban Brokerage Group. If you have any questions regarding market conditions and the information found in this report, please contact Ethan Robert.