ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICE MARKET REPORT

ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICE MARKET REPORT THIRD QUARTER 2017

SUBURBS FINISH THE SUMMER STRONG Greater Boston s suburban office market encompasses over 108 million square feet and consists of eight major submarkets concentrated along Route 128 and Interstate 495, the major thoroughfares that surround the city of Boston. With immense pressure across the Boston and Cambridge markets, tenants have been increasingly evaluating suburban locations for rent relief and future growth opportunities. As Greater Boston s premier suburban market, the Route 128 loop has garnered global recognition for its proximity to urban markets, excellent infrastructure, distinguished tenant base and top quality assets. During the third quarter, leasing velocity cooled however the vacancy rate reached 10.5%, below historical averages. Route 128 boasts some of the region s largest corporations from healthcare and education firms to emerging technology and TAMI tenants. Interstate 495, the outer suburban belt, has traditionally served as the back office and corporate campus solution. However, as the eastern Massachusetts landscape has evolved and become more saturated, tenants are looking to I-495 locations for larger blocks of space as well as more economical solutions across all business sectors. The experience at suburban locations has become increasingly important to today s tenants. That includes contemporary lobbies, vibrant common corridors and interactive indoor/outdoor amenities which complement and enhance tenant s private work spaces. Looking forward, with strong regional macroeconomic indicators and one of the nation s fastest growing population bases, the Greater Boston suburban real estate market is poised from continued growth. # 4.2% # 4.4% # 2.9% AUGUST MASSACHUSETTS UNEMPLOYMENT AUGUST NATIONAL UNEMPLOYMENT ANNUAL WAGE GROWTH 4th HIGHEST GDP PER CAPITA NATIONALLY

MARKET TRENDS BOSTON 10 TH LARGEST NATIONAL METRO Faster population growth than New York & San Francisco $30.00 CLASS A - ASKING RATE VS. DIRECT VACANCY 22.0% $28.50 20.0% $27.00 18.0% VACANCY RATE TO 12.1% Strong demand across submarkets, relief for Downtown/Cambridge $25.50 $24.00 $22.50 16.0% 14.0% 12.0% $21.00 10.0% ASKING RATES RISE AGAIN Inner suburban markets accelerate growth, outer markets steady $19.50 $18.00 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017 8.0% 6.0% Average Asking Rate Direct Vacancy CONTEMPORARY UPGRADES Landlords must adapt and keep common areas & lobbies fresh CREATING A SENSE OF PLACE Open layouts, collaborative environments & unique amenities $23.00 CLASS B - ASKING RATE VS. DIRECT VACANCY 20.0% $22.00 19.0% $21.00 18.0% LOCATION IS NOT FORGOTTEN Highway access, public transit & parking remain paramount $20.00 $19.00 $18.00 17.0% 16.0% 15.0% $17.00 14.0% INVESTMENT SALES QUANDARY Are seller s expectations above willingness to pay? $16.00 $15.00 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017 13.0% 12.0% Average Asking Rate Direct Vacancy

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

SUBMARKET AVERAGE ASKING RATES Rte-2 West $19.95/SF Rte-3 North $20.45/SF 495 North $19.90/SF 128 North $26.33/SF 128 West 128 $32.20/SF West $31.60/SF I-495/Mass Pike $20.61/SF 128 South $21.92/SF 495 South $20.11/SF

CLASS A & B OFFICE ROUTE 128

Following a strong first half of 2017, the market maintained solid momentum however quarterly absorption was tempered by a handful of relocation spaces turning vacant. Generally across the suburbs, the best performing assets are those which cater to modern tenants need such as: contemporary lobbies & common areas, fitness & dining services, creative outdoor spaces in addition to upgraded building mechanicals. To the west of the city, Stewart Healthcare leased 53,000 square feet at 89 A Street in Needham, the company will be relocating from Dedham. 89 A Street is part of Nordblom s redeveloped Founders Park where Stewart will join SharkNinja and Trip Advisor as the anchor tenants. A little closer to the city in Watertown, C4 Therapeutics will be relocating operations from Kendall Square to 45,600 square feet at the LINX. Two other smaller tenants, Socomec and Core States Group will also be moving to Watertown from Cambridge when they relocate to 9 Galen Street later this year. The northern market, lead by amenity rich Burlington, remains one of suburban Boston s strongest technology and defense clusters. The region attracts tenants from Downtown and outer I-495 locations because its position allows tenants to draw from the younger educated urban labor pool as well as provide easy commutes from workers in the north shore and southern New Hampshire. Rumors indicate Computer Associates will uproot their Framingham headquarters and head north to Network Drive. In addition, 128 Technology recently expanded by 16,400 square feet at 200 Wheeler Road bringing their total occupancy to 59,000 square feet. Despite some investor hesitation surrounding the suburban market, the Route 128 market generally feels more insulated than more remote locations along Interstate 495. Two significant trades occurred in Waltham where Northwood acquired 400-460 Totten Pond for $172 per square foot adding to their strong presence on the east side of Route 128. Across the highway, Alexandria RE picked up 266 & 275 Second Avenue from Rockwood Capital. ARE will likely convert 275 Second Avenue into a lab building alongside the already converted 266 Second Avenue. # 10.5% DIRECT VACANCY $ 2.5% SUBLEASE AVAILABILITY # 15.8% TOTAL AVAILABILITY $ (44,400) SF 12-MONTH ABSORPTION # $27.49/SF AVERAGE ASKING RATE

CLASS A & B OFFICE ROUTE 128 NOTABLE QUARTERLY LEASES ADDRESS TOWN SUBMARKET TENANT SF Union Point Weymouth South Weymouth 128 South Prodrive Technologies 300,000 150 Minuteman Road Andover 128 North Smith & Nephew 150,000 300 Boylston Street Chestnut Hill 128 West Dana Farber 140,000 70 Everett Avenue Chelsea Inner Suburbs Bunker Hill CC 70,000 404 Wyman Street Waltham 128 West National Grid 68,000 89 A Street Needham 128 West Stewart Healthcare 53,000 LINX Watertown Watertown 128 West C4 Therapeutics 45,600 500 Rivers Edge Norwood 128 South Corbus Pharmaceuticals 32,000 247 Station Drive Westwood 128 South Beth Israel 21,000 200 Summit Drive Burlington 128 North 128 Technology 16,400 Riverworks Watertown 128 West InCrowd 11,000 9 Galen Street Watertown 128 West Socomec 5,700 9 Galen Street Watertown 128 West Core States Group 4,500 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017 3.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017 West South North

RECENT INVESTMENT SALES Totten Pond Road Waltham 233 Needham Street Newton Cherry Hill Drive Danvers 266-275 Second Avenue Waltham 400-460 Totten Pond Road, Waltham $51,500,000 ($172/RSF) Buyer: Northwood 233 Needham Street, Newton $20,850,000 ($342/RSF) Buyer: MA Credit Union Cherry Hill Drive Portfolio $52,800,000 ($101/RSF) Buyer: RJ Kelly 266-275 Second Avenue, Waltham $70,945,000 ($351/RSF) Buyer: Alexandria RE

CLASS A & B OFFICE INTERSTATE 495

Quarterly performances were mixed across I-495 s submarkets, however the total market recorded 90,100 square feet of net quarterly absorption. Generally speaking, I-495 offers less volatility that its more urban counterparts by historically maintaining a 12-18% vacancy rate with average rents in the high teens to mid $20 s for well positioned product. The I-495 market captures both expansion and relocation demand from tech, medical and defense tenants feeling the squeeze in more urban locations. In addition, there is a large share of the I-495 market that is smaller non-publicly traded companies whose workforce and clients prefer the conveniences that the less congested markets provide. The Mass Pike submarket posted nearly 215,000 square feet of absorption through a handful of leases. At the newly acquired Marlborough Technology Park, Optos committed to 23,200 square feet at 500 Nickerson Road, in a relocation from 67 Forest Street. Also within the park recently, ViaSat signed for 20,800 square feet at 300 Nickerson Road, while Rockwell Automation leased 17,600 square feet at 100 Nickerson Road. Northwest of the city in Boxborough, Symantec leased 42,500 square feet at 80 Central Street while further north along I-495, Aspect Software signed for 29,900 square feet and 5 Technology Drive in Westford. The forecast for the Interstate 495 market remains bright particularly as interior suburban locations become more crowded 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. The cultural activation component can be challenging, as a result many landlords are proactively meeting the market through enhanced on-site amenities and other creative innovations that emphasize placemaking. # 14.4% DIRECT VACANCY # 2.3% SUBLEASE AVAILABILITY $ 20.1% TOTAL AVAILABILITY $ 1,120,000 SF 12-MONTH ABSORPTION # $20.34/SF AVERAGE ASKING RATE

CLASS A & B OFFICE INTERSTATE 495 NOTABLE RECENT LEASES ADDRESS TOWN SUBMARKET TENANT SF 2 Executive Drive Chelmsford Route 3 North Rockwell Automation 57,000 80 Central Street Boxborough Route 2 West Symantec 42,500 35 Parkwood Drive Hopkinton 495 Mass Pike Speedline 40,000 5 Technology Drive Westford Route 3 North Aspect Software 29,900 200 Brickstone Square Andover 495 Northeast Compliance Technologies 29,000 500 Nickerson Road Marlborough 495 Mass Pike Optos 23,200 300 Nickerson Road Marlborough 495 Mass Pike ViaSat 20,800 100 Nickerson Road Marlborough 495 Mass Pike Rockwell Automation 17,600 2 Highwood Drive Tewksbury Route 3 North Mirror Image Internet 15,600 293 Boston Post Road Marlborough 495 Mass Pike Valeritas 15,200 132 Turnpike Road Southborough 495 Mass Pike Virtusa Corporation 12,000 Mill & Main Maynard Route 2 West Revolution Factory 9,000 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017 6.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017 Northeast South Mass Pike

RECENT INVESTMENT SALES 297 Billerica Road Chelmsford 40 Shattuck Road Andover Brickstone Square Andover 289 Great Road Acton Brickstone Square, Andover $90,000,000 ($93/RSF) Recap: KS Partners & Contrarian Capital 289 Great Road, Acton $7,600,000 ($91/RSF) Buyer: Lexington Management 297 Billerica Road, Chelmsford $12,400,00 ($96/RSF) Buyer: DFCU 40 Shattuck Road, Andover $12,000,000 ($99/RSF) Buyer: Cummings Properties

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 4,184,000 10.7% 1.4% 15.8% 54,450 3,150 $36.08 ROUTE 128 60,093,000 10.5% 2.5% 15.8% (87,000) (44,400) $27.49 128 West 24,446,000 9.3% 3.4% 15.7% (142,200) (101,950) $32.20 128 North 18,883,000 10.9% 2.0% 15.8% 12,200 5,150 $26.33 128 South 16,764,000 11.9% 1.7% 15.8% 43,050 52,450 $21.92 INTERSTATE 495 42,456,000 14.4% 2.3% 20.1% 90,050 1,119,750 $20.34 495 Mass Pike West 19,114,000 13.7% 3.7% 21.9% 215,150 691,950 $20.61 495 Route 2 West 6,585,000 19.2% 0.9% 23.3% 46,550 337,900 $19.95 495 Northeast 5,721,500 18.2% 0.9% 19.8% 13,600 191,300 $19.90 Route 3 North 6,763,500 9.2% 2.1% 15.3% (58,300) (85,150) $20.45 495 South 4,272,500 12.9% 0.2% 15.5% (126,950) (16,250) $20.11 CLASS A TOTAL 106,732,700 12.1% 2.4% 17.5% 57,450 1,078,500 $24.98 Inner Suburbs 2,751,750 6.7% 2.0% 11.8% 31,150 (1,750) $36.17 ROUTE 128 37,714,100 10.3% 3.1% 15.8% (12,500) (149,350) $30.61 128 West 15,180,950 8.6% 4.1% 14.6% (34,850) (123,750) $36.67 128 North 12,906,050 11.4% 2.2% 17.1% (12,700) (6,750) $28.84 128 South 9,627,150 11.3% 2.7% 15.9% 35,100 (18,900) $23.42 INTERSTATE 495 22,709,650 12.7% 2.7% 18.3% (90,550) 357,050 $21.81 495 Mass Pike West 11,595,400 12.7% 3.5% 20.3% 154,200 359,400 $21.88 495 Route 2 West 2,649,250 11.3% 2.2% 15.0% (30,550) (86,650) $21.61 495 Northeast 3,173,500 17.8% 1.2% 19.9% 24,900 217,200 $20.92 Route 3 North 3,699,850 9.1% 2.6% 12.6% (84,250) (49,150) $22.89 495 South 1,591,650 13.8% 0.2% 19.4% (154,850) (83,750) $20.95 CLASS B TOTAL 63,175,500 11.0% 2.9% 16.5% (71,900) 205,900 $27.69 Inner Suburbs 1,432,00 18.5% 0.2% 23.6% 23,250 4,900 $36.00 ROUTE 128 22,378,800 11.0% 1.5% 15.8% (74,550) 104,950 $24.46 128 West 9,265,000 10.4% 2.4% 17.5% (107,350) 21,750 $28.49 128 North 5,976,700 9.8% 1.5% 13.2% 24,850 11,850 $22.62 128 South 7,137,050 12.7% 0.4% 15.7% 7,900 71,350 $20.79 INTERSTATE 495 19,746,400 16.3% 1.9% 22.2% 180,650 762,700 $19.10 495 Mass Pike West 7,518,350 15.4% 4.0% 24.3% 60,950 332,500 $19.25 495 Route 2 West 3,935,500 24.5% 0.1% 28.8% 77,100 424,550 $19.36 495 Northeast 2,548,050 18.7% 0.5% 19.6% (11,300) (25,850) $18.36 Route 3 North 3,063,600 9.3% 1.3% 18.7% 25,950 (35,950) $18.38 495 South 2,680,900 12.3% 0.3% 13.1% 27,950 67,500 $19.83 TOTAL 43,557,200 13.6% 1.6% 18.9% 129,350 872,600 $22.41

ETHAN ROBERT Director of Research O: 617.951.4160 erobert@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.