ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICE MARKET REPORT

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

POSITIVE ANNUAL ABSORPTION ACROSS MAP Greater Boston s suburban office market encompasses over 107 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 fourth quarter, leasing velocity ramped up following a sluggish third quarter which lowered the vacancy rate to 10.1%. 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. Despite a slow fourth quarter, I-495 s annual absorption eclipsed 909,000 square feet which reduced the total vacancy rate to 14.6%. 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 for continued growth. 3.6% NOVEMBER MASSACHUSETTS UNEMPLOYMENT 4.1% NOVEMBER NATIONAL UNEMPLOYMENT # 2.9% ANNUAL WAGE GROWTH 2 ND HIGHEST GDP PER CAPITA NATIONALLY

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

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

SUBMARKET AVERAGE ASKING RATES Rte-2 West $19.98/SF Rte-3 North $21.32/SF 495 North $19.96/SF 128 North $26.70/SF 128 West $32.57/SF I-495/Mass Pike $20.70/SF 128 South $22.19/SF 495 South $20.13/SF

CLASS A & B OFFICE ROUTE 128

The market maintained solid momentum through year s end despite posting a sluggish third quarter. Overall vacancy is down to 10.1% which has supported asking rate growth and brought the average asking rate into the high $20 s PSF. Generally speaking, the best performing assets cater to modern tenants including: contemporary lobbies & common areas, fitness & dining services, creative outdoor spaces in addition to upgraded building mechanicals and infrastructure. To the west of the city, in one of the quarter s larger transactions, Tech Target renewed its 110,000 square foot lease at 275 Grove Street in Newton. Waltham continued its torrid streak by pulling Simpson Gumpertz & Herger from Watertown into a 100,000 square foot lease at the to be constructed 20 City Point. On the other side of Route 128, Mass General Hospital expanded and extended its presence along Second Avenue into roughly 106,000 square feet. The northern market, lead by amenity rich Burlington, remains one of suburban Boston s strongest technology and defense clusters. At One Burlington Woods, All Scripts renewed and expanded into 44,000. 128 Technology grew its presence by 16,400 square feet at 200 Summit Drive while City Facilities Management inked a 7,050 square foot lease at the same building. The southern market posted strong quarterly absorption which helped promote asking rate growth particularly in the Class A market where average rents are nearly 35% lower than comparable space in the north & west suburbs. These significant costs savings have become a real threat, and tenants across the suburbs and Boston have taken notice. Despite some investor hesitation surrounding the suburban market, the Route 128 market generally feels more insulated than more remote locations along Interstate 495. To that point, several significant transactions closed this quarter and more are teed up. Most notably, Spear Street closed on Corporate Drive in Burlington for $272 PSF while closer into the city, Normandy added 35 Medford Street in Somerville to its growing Inner Suburban portfolio, paying $427 PSF for the brick & beam asset. $ 10.1% DIRECT VACANCY $ 2.2% SUBLEASE AVAILABILITY $ 15.2% TOTAL AVAILABILITY # 538,500 SF 12-MONTH ABSORPTION # $27.83/SF AVERAGE ASKING RATE

CLASS A & B OFFICE ROUTE 128 NOTABLE QUARTERLY LEASES ADDRESS TOWN SUBMARKET TENANT SF 300 Boylston Street Chestnut Hill 128 West Dana Farber 140,000 275 Grove Street Newton 128 West Tech Target 110,000 52 Second Avenue Waltham 128 West Mass General Hospital 106,000 20 City Point Waltham 128 West Simpson Gumpertz & Heger 100,000 45 Network Drive Burlington 128 North CA Technologies 80,000 404 Wyman Street Waltham 128 West National Grid 68,000 89 A Street Needham 128 West Stewart Healthcare 53,000 48 Woerd Avenue Waltham 128 West Olympus Scientific Solutions 45,000 One Burlington Woods Burlington 128 North All Scripts 44,000 325 Wood Road Braintree 128 South New England Quality Care 28,000 490 Arsenal Way Watertown 128 West Macrolide Pharmaceuticals 18,500 200 Summit Drive Burlington 128 North 128 Technology 16,400 101 Station Drive Westwood 128 South Mott MacDonald 12,000 200 Boston Avenue Medford 128 North enevolv 10,000 200 Summit Drive Burlington 128 North City Facilities Management 7,050 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 2017 3.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 West South North

Corporate Drive Burlington RECENT INVESTMENT SALES 35 Medford Street Somerville 45-65 Hayden Avenue Lexington 130 Royall Street Canton Corporate Drive, Burlington $133,500,000 ($272/RSF) Buyer: Spear Street 45-65 Hayden Avenue, Lexington $228,000,000 ($588/RSF) Buyer: HCP, Inc. 35 Medford Street, Somerville $23,800,000 ($427/RSF) Buyer: Normandy 130 Royall Street, Canton $37,273,000 ($213/RSF) Buyer: Livingston Street Capital

CLASS A & B OFFICE INTERSTATE 495

Quarterly performances were mixed across I-495 s submarkets with the net result leading to just over 107,000 square feet of negative quarterly net absorption. However, from an annual perspective the market achieved nearly 910,000 square feet of positive absorption which dropped the vacancy rate to 14.6%. 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 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 market provides. The Route 3 North corridor, which houses some of I-495 s premier technology & defense tenants, has performed very well over the past 24 months and seen its vacancy rate drop to 8.2%. This quarter, Innolve signed a 58,000 square foot lease for the entire building at 129 Concord Road in Billerica. At 201 Burlington Road in Bedford, national defense expert, MITRE, signed a 41,000 square foot contract. Finally, Aspect Software committed to 29,900 square feet at 5 Technology Drive in Westford. Several leases were signed in the Mass Pike submarket. At the not so long ago fully vacant 35 Parkwood Drive in Hopkinton, Speedline signed a new 40,000 square foot lease. At 293 Boston Post Road in Marlborough, Valeritas signed a new 15,200 square foot lease. One exit south, AnchorOps inked a 10,700 lease at 144 Turnpike Road in Southborough. 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. # 14.6% DIRECT VACANCY $ 2.2% SUBLEASE AVAILABILITY # 20.2% TOTAL AVAILABILITY $ 909,700 SF 12-MONTH ABSORPTION # $20.53/SF AVERAGE ASKING RATE

CLASS A & B OFFICE INTERSTATE 495 NOTABLE RECENT LEASES ADDRESS TOWN SUBMARKET TENANT SF 129 Concord Road Billerica Route 3 North Innolve 58,000 2140 Providence Hwy Walpole 495 South Bi-County Charter School 46,000 201 Burlington Road Bedford Route 3 North MITRE 41,000 35 Parkwood Drive Hopkinton 495 Mass Pike Speedline 40,000 5 Technology Drive Westford Route 3 North Aspect Software 29,900 One Cabot Road Hudson 495 Mass Pike Vision Government Solutions 20,000 293 Boston Post Road Marlborough 495 Mass Pike Valeritas 15,200 132 Turnpike Road Southborough 495 Mass Pike Virtusa Corporation 12,000 21 Alpha Road Chelmsford Route 3 North Cab Technology 11,100 175 Crossing Boulevard Framingham 495 Mass Pike Boston Heart Diagnostics 11,000 144 Turnpike Road Southborough 495 Mass Pike AnchorOps 10,700 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 6.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Northeast South Mass Pike

RECENT INVESTMENT SALES 900 Middlesex Tpk. Billerica 60 Frontage Road Andover 101 Billerica Avenue Billerica 2-5 Mount Royal Marlborough 101 Billerica Avenue, Billerica $40,400,000 ($87/RSF) Buyer: Condyne 900 Middlesex Turnpike, Billerica $13,300,000 ($145/RSF) Buyer: Spaulding & Slye 60 Frontage Road, Andover $8,150,000 ($55/RSF) Buyer: Raytheon 2-5 Mount Royal, Marlborough $8,550,000 ($54/RSF) Buyer: CB Equities

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 4,183,800 11.0% 1.4% 15.9% (9,750) 8,150 $36.77 ROUTE 128 60,092,850 10.1% 2.2% 15.2% 388,650 538,500 $27.83 128 West 24,445,950 9.2% 3.0% 14.6% 178,950 35,800 $32.57 128 North 18,882,750 11.1% 1.7% 15.0% (34,200) 198,100 $26.70 128 South 16,764,200 10.5% 1.5% 16.2% 243,850 304,600 $22.19 INTERSTATE 495 42,436,100 14.6% 2.2% 20.2% (107,950) 909,700 $20.53 495 Mass Pike West 19,113,750 15.0% 3.6% 22.3% (243,900) 256,850 $20.70 495 Route 2 West 6,609,750 18.8% 0.9% 24.2% 27,700 286,500 $19.98 495 Northeast 5,721,500 18.0% 1.1% 19.8% 10,350 159,250 $19.96 Route 3 North 6,718,450 8.2% 1.8% 12.9% 65,350 75,500 $21.32 495 South 4,272,550 12.1% 0.2% 16.3% 32,500 131,650 $20.13 CLASS A TOTAL 106,712,750 12.0% 2.2% 17.2% 270,950 1,456,350 $25.28 Inner Suburbs 2,751,750 6.7% 2.0% 11.5% 1,000 13,800 $37.33 ROUTE 128 37,714,100 9.3% 2.8% 15.0% 378,850 360,300 $31.00 128 West 15,180,950 7.6% 3.7% 13.4% 205,850 101,400 $37.06 128 North 12,906,100 10.6% 1.9% 15.2% 71,700 122,550 $29.24 128 South 9,627,150 10.3% 2.5% 17.2% 101,300 136,350 $23.80 INTERSTATE 495 22,709,650 13.0% 2.6% 18.9% (66,550) 237,000 $21.91 495 Mass Pike West 11,595,400 14.2% 3.5% 21.4% (178,200) (400) $21.89 495 Route 2 West 2,649,250 10.1% 2.1% 17.8% 30,950 (63,750) $21.40 495 Northeast 3,173,500 17.7% 1.1% 20.0% 3,400 167,150 $20.92 Route 3 North 3,699,850 7.0% 2.6% 10.5% 78,350 57,200 $23.57 495 South 1,591,650 13.9% 0.2% 19.5% (1,050) 76,800 $20.95 CLASS B TOTAL 63,175,500 10.5% 2.7% 16.2% 313,150 611,100 $28.01 Inner Suburbs 1,432,050 19.2% 0.2% 24.2% (10,500) (5,650) $36.29 ROUTE 128 22,378,750 11.5% 1.2% 15.5% 9,800 178,20 $24.70 128 West 9,265,000 11.7% 2.0% 16.6% (26,850) (65,550) $28.74 128 North 5,976,700 12.1% 1.4% 14.7% (105,900) 75,550 $22.88 128 South 7,137,050 10.7% 0.1% 14.7% 142,500 168,250 $20.96 INTERSTATE 495 19,726,400 16.5% 1.7% 21.6% (41,450) 672,700 $19.34 495 Mass Pike West 7,518,350 16.2% 3.8% 23.6% (65,700) 257,200 $19.38 495 Route 2 West 3,960,500 24.6% 0.1% 28.5% (3,250) 350,300 $19.41 495 Northeast 2,548,050 18.4% 1.1% 19.5% 6,950 (7,950) $18.69 Route 3 North 3,018,650 9.7% 0.7% 15.9% (13,000) 18,300 $19.25 495 South 2,680,950 11.1% 0.2% 14.5% 33,500 54,850 $19.86 TOTAL 43,537,250 14.0% 1.4% 18.6% (42,200) 845,300 $22.65

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.