ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICE MARKET REPORT

ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICE MARKET REPORT SECOND QUARTER 2018

NEGATIVE ABSORPTION DOESN T TELL WHOLE STORY Greater Boston s suburban office and lab market encompasses over 125 million square feet and consists 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 pricing and the suburbs and the market adjusts accordingly. 3.5% MAY MASSACHUSETTS UNEMPLOYMENT 3.8% MAY NATIONAL UNEMPLOYMENT # $2.6B MA QUARTERLY VC FUNDING (Q1) 2 ND NATIONALLY IN QUARTERLY (Q1) VC FUNDING

MARKET TRENDS CLASS A ASKING RATE VS. DIRECT VACANCY $30.00 22.0% VACANCY RATE TO 12.5% $28.50 $27.00 20.0% 18.0% Strong demand across submarkets as relief for Downtown/Cambridge $25.50 $24.00 16.0% 14.0% CONTEMPORARY UPGRADES $22.50 $21.00 12.0% 10.0% Landlords must adapt and keep common areas & lobbies fresh $19.50 $18.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 8.0% 6.0% CREATING A SENSE OF PLACE Average Asking Rate Direct Vacancy (%) 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 $21.00 20.0% 19.0% 18.0% 17.0% INVESTMENT SALES REBOUND Watch for a busy year in the suburbs $20.00 $19.00 $18.00 16.0% 15.0% 14.0% ASKING RATES RISE AGAIN Inner suburban markets accelerate growth, outer markets steady $17.00 $16.00 2009 2010 2011 2012 2013 Average Asking Rate 2014 2015 2016 2017 Direct Vacancy (%) YTD2018 13.0% 12.0%

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

SUBMARKET AVERAGE ASKING RATES Rte-2 West $19.92/SF Rte-3 North $21.49/SF 495 North $20.05/SF 128 North $27.11/SF 128 West $33.01/SF I-495/Mass Pike $21.06/SF 128 South $22.59/SF 495 South $20.03/SF

CLASS A & B OFFICE ROUTE 128

Despite this quarter s negative absorption, the market remains extremely healthy with an 11.!% vacancy rate and continued asking rate growth. Following Reebok s relocation into the Seaport and their subsequent vacancy of roughly 500,000 leasable square feet at their former Canton headquarters, the market took a dip. When this one single event is removed, total market absorption swings to nearly positive 150,000 square feet. Given the wealth of on-site amenities, excellent highway access and newer construction, Reebok s former campus will likely be re-absorbed within 18-24 months. The suburban lab market posted a busy second quarter. In Waltham, The Davis Companies landed Alkermes for a 220,000 square foot build to suit at 900 Winter Street. A couple exits north in Lexington, two large leases were signed at the formerly fully vacant 65 Hayden Avenue. In a relocation from neighboring Ledgemont Center, Concert Pharmaceuticals signed a long term 55,500 square feet lease. Joining them at the property is Kaleido Biosciences who will shift their headquarters down from Bedford into 78,000 square feet at 65 Hayden Avenue. The Hayden Research Campus is now nearly fully leased and rumors suggest the ownership team is looking closely at developing an additional 200,000+ square feet on campus. The Waltham office market remained very active following last quarter s announcement that Boston Properties landed Simpson Gumpertz & Herger s 100,000 square foot requirement at the under construction 20 City Point. The first lease was executed at The Post when Deciphera Pharmaceuticals announced their relocation from 10 City Point into 44,000 square feet at the newly redeveloped facility. Despite securing the office requirement, The Post remains actively marketing to lab and tech users in addition to creative office requirements. The southern Route 128 market continued gaining ground, however the pace of asking rate growth has not kept up with the west and north markets. Campanelli landed their first tenant at 100 TECH in Stoughton where the south shore operator implemented an expansive revitalization program. Collegium Pharmaceuticals, currently located at 780 Dedham Street in Canton, signed a 50,700 lease at the newly repositioned property. # 11.1% DIRECT VACANCY 2.4% SUBLEASE AVAILABILITY # 16.2% TOTAL AVAILABILITY (363,500) SF 12-MONTH ABSORPTION # $28.28/SF AVERAGE ASKING RATE

CLASS A & B OFFICE/LAB ROUTE 128 NOTABLE RECENT LEASES ADDRESS TOWN SUBMARKET TENANT SF 900 Winter Street Waltham 128 West Alkermes* 220,000 400 Rivers Edge Medford Inner Suburbs Agero 115,000 65 Hayden Avenue Lexington 128 West Kaleido Biosciences* 78,000 65 Hayden Avenue Lexington 128 West Concert Pharmaceuticals* 55,500 100 Technology Way Stoughton 128 South Collegium Pharmaceuticals 50,700 200 Smith Street Waltham 128 West Deciphera Pharmaceuticals 44,000 500 Rivers Ridge Norwood 128 South Corbus Pharmaceuticals* 32,000 117 Kendrick Street Needham 128 West Warner Brothers 30,000 275 Second Avenue Waltham 128 West Visterra* 27,000 One Cabot Road Medford Inner Suburbs iheartradio 21,500 65 Hayden Avenue Lexington 128 West Accent Therapeutics* 15,200 63 Kendrick Street Needham 128 West Schernecker Property Service 10,050 200 Boston Avenue Medford Inner Suburbs enevolv 10,000 800 South Street Waltham 128 West Green Elm Capital 8,350 *lab transaction AVERAGE ASKING RATE BY SUBMARKET AVERAGE DIRECT VACANCY BY SUBMARKET $33.00 27.0% $31.00 24.0% $29.00 21.0% $27.00 18.0% $25.00 15.0% $23.00 12.0% $21.00 9.0% $19.00 6.0% $17.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 3.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 West South North

RECENT INVESTMENT SALES 91 Hartwell Avenue Lexington 67 South Bedford Burlington One Edgewater Drive Norwood Reebok Campus Canton Reebok Campus, Canton $88,000,000 ($130/RSF) Buyer: Spear Street 67 South Bedford, Burlington $55,000,000 ($314/RSF) Buyer: Carlyle 91 Hartwell Avenue, Lexington $22,200,000 ($186/RSF) Buyer: ASB Capital/Lincoln Property Co One Edgewater Drive, Norwood $12,000,000 ($132/RSF) Buyer: Casey & Hayes

CLASS A & B OFFICE INTERSTATE 495

Quarterly performances were mixed across I-495 s submarkets with the net result leading to just under 75,000 square feet of net positive quarterly absorption which lowered the average vacancy rate ten basis points to 14.9%. Generally speaking, I-495 offers less volatility than its more urban counterparts by historically maintaining a 12-18% vacancy rate with average rents in the high teens to mid $20 s per square foot. The Route 3 North corridor, which houses some of I-495 s premier technology & defense tenants, recorded strong quarterly activity in Tewksbury and Billerica. L3 Communications will reportedly take down the entire 140,000 square foot building at One Radcliff Road in Tewksbury. 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. Several leases were signed in the Mass Pike submarket. At 35 Parkwood Drive, a formerly vacant EMC building, ownership has nearly completed their leasing campaign after signing Spring Bank Pharmaceuticals to a 29,850 square foot lease. At 144 Turnpike Road in Southborough, Alliance Health signed a 7,500 square foot lease and AnchorOps committed to 10,700 square feet. A couple exits north in Hudson, D3 Graphics signed a 9,200 square foot lease at 399 River Road. 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. $ 14.9% DIRECT VACANCY $ 1.7% SUBLEASE AVAILABILITY $ 19.6% TOTAL AVAILABILITY $ (39,350) SF 12-MONTH ABSORPTION # $20.71/SF AVERAGE ASKING RATE

CLASS A & B OFFICE INTERSTATE 495 NOTABLE RECENT LEASES ADDRESS TOWN SUBMARKET TENANT SF 125 Middlesex Turnpike Bedford Route 3 North Novanta 147,400 One Radcliff Road Tewksbury Route 3 North L3 Communication 140,000 805 Middlesex Avenue Billerica Route 3 North ClearMotion 122,000 100 Brickstone Square Andover 495 Northeast Aras Corporation 66,300 35 Parkwood Drive Hopkinton 495 Mass Pike Spring Bank Pharma 29,850 300 Apollo Drive Chelmsford Route 3 North HCL America 29,050 One Cabot Road Hudson 495 Mass Pike Vision Government Services 16,000 132 Turnpike Road Southborough 495 Mass Pike Virtusa Corporation 12,000 399 River Road Hudson 495 Mass Pike D3 Graphics 9,200 3 Speen Street Natick 495 Mass Pike DTR Advertising 8,000 144 Turnpike Road Southborough 495 Mass Pike Alliance Health 7,500 35 New England Business Andover 495 Northeast Encompass Home Health 5,100 AVERAGE ASKING RATE BY SUBMARKET AVERAGE DIRECT VACANCY BY SUBMARKET $23.00 34.0% $22.00 30.5% $21.00 27.0% $20.00 23.5% $19.00 20.0% $18.00 16.5% $17.00 13.0% $16.00 9.5% $15.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 6.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 Northeast South Mass Pike

RECENT INVESTMENT SALES 250 Apollo Drive Chelmsford 295 Foster Street Littleton 150 Minuteman Road Andover 15 Pleasant Street Framingham 150 Minuteman Road, Andover $32,000,000 ($285/RSF) Buyer: Bentall Kennedy 250 Apollo Drive, Chelmsford $11,000,000 ($77/RSF) Buyer: Atsco Footwear 295 Foster Street, Littleton $4,900,000 ($51/RSF) Buyer: SSP Realty 15 Pleasant Street, Framingham $4,410,000 ($68/RSF) Buyer: AMERCO

OFFICE REPORT STATS

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 5,033,800 7.8% 2.0% 12.9% 21,650 127,700 $37.38 ROUTE 128 59,859,100 11.1% 2.4% 16.2% (805,400) (363,550) $28.28 128 West 24,692,950 8.9% 3.2% 15.3% (75,050) 69,800 $33.01 128 North 18,401,950 11.4% 1.4% 14.6% (100,050) (109,150) $27.11 128 South 16,764,150 14.1% 2.4% 19.5% (630,250) (324,150) $22.59 INTERSTATE 495 42,364,050 14.9% 1.7% 19.6% 74,950 (39,350) $20.71 495 Mass Pike West 19,041,750 15.6% 2.8% 21.8% 99,300 (121,350) $21.06 495 Route 2 West 6,609,750 19.1% 0.5% 22.7% (30,850) (47,250) $19.92 495 Northeast 5,721,550 17.4% 1.0% 19.5% (63,500) 60,150 $20.05 Route 3 North 6,718,450 8.8% 1.5% 12.5% 30,450 (35,150) $21.49 495 South 4,272,600 11.2% 0.1% 16.0% 39,550 104,250 $20.03 CLASS A TOTAL 107,256,950 12.5% 2.1% 17.4% (708,750) (275,200) $25.72 Inner Suburbs 2,751,750 5.3% 3.5% 11.6% 4,050 70,450 $38.08 ROUTE 128 36,953,350 11.0% 2.9% 16.7% (751,650) (220,600) $31.60 128 West 15,180,950 7.9% 3.7% 14.8% (129,950) 144,050 $37.53 128 North 12,145,250 11.2% 1.7% 15.0% (97,850) (1,000) $29.75 128 South 9,627,150 15.5% 3.2% 21.9% (523,800) (363,800) $24.58 INTERSTATE 495 22,709,650 13.7% 2.9% 19.3% 127,050 (144,800) $21.94 495 Mass Pike West 11,595,400 15.2% 4.2% 22.4% 99,650 (144,650) $22.04 495 Route 2 West 2,649,250 10.8% 1.2% 13.8% (34,350) (16,650) $21.38 495 Northeast 3,173,500 19.0% 1.7% 22.6% 33,950 (13,350) $20.92 Route 3 North 3,699,850 5.9% 2.3% 9.7% 21,400 34,100 $23.61 495 South 1,591,650 14.4% 0.0% 21.1% 6,250 (4,300) $20.33 CLASS B TOTAL 62,414,750 11.7% 2.9% 17.4% (620,550) (295,050) $28.37 Inner Suburbs 2,282,050 10.8% 0.3% 14.4% 17,650 57,250 $36.79 ROUTE 128 22,905,750 11.5% 1.7% 15.5% (53,750) (142,950) $25.04 128 West 9,512,000 10.6% 2.3% 16.0% 54,950 (74,250) $29.10 128 North 6,256,700 11.8% 0.9% 13.9% (2,250) (108,350) $23.31 128 South 7,137,050 12.3% 1.5% 16.1% (106,450) 39,650 $21.14 INTERSTATE 495 19,654,450 16.3% 0.4% 19.9% (52,050) 105,550 $19.54 495 Mass Pike West 7,446,400 16.2% 0.8% 20.8% (500) 23,300 $19.80 495 Route 2 West 3,960,450 24.7% 0.0% 28.6% 3,450 (30,550) $19.40 495 Northeast 2,548,050 15.4% 0.2% 15.6% (97,450) 73,550 $18.57 Route 3 North 3,018,650 12.4% 0.5% 15.9% 9,050 (69,250) $19.54 495 South 2,680,950 9.3% 0.1% 12.9% 33,350 108,550 $19.95 TOTAL 44,842,250 13.5% 1.0% 17.3% (88,250) 19,850 $23.22

ETHAN ROBERT Director of Research O: 617.951.4160 erobert@lpc.com MARY PATALITA Associate O: 617.951.4119 mpatalita@lpc.com Lincoln Property Company 53 State Street, 8th Floor, Boston, MA 617.951.4100 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.