ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICEMARKET REPORT

SECOND QUARTER 2019

STEADY LEASING VELOCITY & MOMENTUM ACROSS THE SUBURBSGreater 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. With Cambridge having near zero

availability and lab space in the area being so expensive, many life science companies are also

looking towards the suburbs to find accommodating lab space. More established suburban

lab markets such as Lexington and Waltham are thriving while relative new comers such as

Watertown, Bedford, and Framingham are being revitalized by strong tenant demand.

Looking forward, strong regional macroeconomic indicators coupled with strengthening

regional demographics have the Greater Boston suburban real estate market positioned for

future growth, reflected by a very strong first half of 2019. With Boston’s notably compact size

and limited transit network, there is enormous potential for growth within the inner suburban

markets. 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.

3.0%MAY

MASSACHUSETTS UNEMPLOYMENT

3.6%MAY

NATIONAL UNEMPLOYMENT

$12BMASSACHUSETTS ANNUAL (2018) VC FUNDING

#1NATIONALLY

R&D FUNDING PER CAPITA

MARKET TRENDS

CONTEMPORARY UPGRADES

Landlords must adapt and keep common areas and lobbies fresh

BIG BLOCKSTenants seeking larger blocks of space that

are unavailable in the city

LIFE SCIENCE DESTINATION

Tenants being pushed out of Cambridge

TENANTS FAVOR CREATIVE OFFICE

Creating the Downtown feel in a suburban setting

INVESTMENT SALES REBOUNDING2019 off to a hot start outside of the city

ASKING RATES RISE AGAIN

Inner suburban markets accelerate growth, outer markets steady

$18.00

$20.00

$22.00

$24.00

$26.00

$28.00

$30.00

$32.00

Average Asking Rate

201920182017201620152014201320122011201020096.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

Direct Vacancy (%)

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

$23.00

$24.00

Average Asking Rate

2019201820172016201520142013201220112010200912.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

Direct Vacancy (%)

CLASS AASKING RATE VS. DIRECT VACANCY

CLASS BASKING RATE VS. DIRECT VACANCY

DIRECT VACANCY RATE BY SUBMARKET

0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0%

495 South

128 West

Inner Suburbs

Route 3 North

128 North

128 South

495 Northeast

Mass Pike

Route 2 West

SUBMARKET AVERAGE ASKING RATES

495 North$20.24/SF

Rte-3 North$21.95/SF

I-495/Mass Pike$21.64/SF

495 South$20.01/SF

Rte-2 West$20.15/SF

128 West$33.96/SF

128 North$28.57/SF

128 South$23.14/SF

CLASS A & B OFFICEROUTE 128

10.0% DIRECT VACANCY

#2.9% SUBLEASE AVAILABILITY

#15.9% TOTAL AVAILABILITY

#38,350 SF 12-MONTH ABSORPTION

#$29.27/SF AVERAGE ASKING RATE

• Amazon is joining the northern migration of office tenants

along the MBTA Orange Line corridor with a lease of 50,000

square feet at One Cabot in Medford’s Wellington Circle. The

e-commerce giant will relocate employees from a WeWork

coworking space in Back Bay to the new location. The office

space is Amazon’s first local presence outside of Boston and

Cambridge.

• Candel Therapeutics, an immunotherapies biotech company,

recently signed a 16,000 square foot office and lab lease at 117

Kendrick Street in Needham. The property was repositioned

by Bulfinch Companies caters to life science and R&D tenants.

It sits near Route 128 and is part of the N2 Innovation Corridor

hosting other tenants like Shark Ninja, Partners Healthcare,

Steward and NBC Universal. Although lacking the critical mass

of more established lab and R&D markets such as Lexington and

Waltham, the N2 micro market is certainly one to watch with its

heavy infrastructure and accessibility.

• Following the sale of their longtime headquarters at 85 Walnut

Street in Watertown, Doble Engineering will relocate into

79,000 square feet in Marlborough. The power grid specialists’

new headquarters at 123 Felton Street features a combination

of office and flex R&D space. Doble also reportedly has the

opportunity to expand the property by up to 7,000 square feet.

• The investment sales market steadily moved along with a few

transactions closing and many more coming to market. Most

notably, Starwood Capital recapitalized the seven-building

Network Drive portfolio in Burlington from Nordblom for

nearly $330 per square foot. The campus is the highest quality

real estate in Burlington; however, it lacks the critical mass of

walkable amenities featured at The District, Wayside & Mall

Road assets.

NOTABLE RECENT LEASES

CLASS A & B OFFICE/LABROUTE 128

ADDRESS TOWN SUBMARKET TENANT SF

University Station Westwood 128 South Citizens Financial Group 100,000

1525 Washington Braintree 128 South Hub Pen Co. 97,000

55 Network Dr Burlington 128 North Cadence Design Systems 44,000

200 Smith St Waltham 128 West Dicephera Pharmaceuticals 38,000

21 North Ave Burlington 128 North Viken Detections 30,000

325 Wood Rd Braintree 128 South New England Quality Care 26,000

230 CityPoint Waltham 128 West Wolters Kluwer 20,000

150 Royall St Canton 128 South OneDigital Health 15,000

1075 Main St Waltham 128 West TNP 9,200

250 First Ave Needham 128 West Gennari Aronson 8,000

$15.00

$19.00

$23.00

$27.00

$31.00

$35.00

2019201820172016201520142013201220112010200920083.0%

6.0%

9.0%

12.0%

15.0%

18.0%

21.0%

24.0%

27.0%

201920182017201620152014201320122011201020092008

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

West South North

RECENT INVESTMENT

SALES

NETWORK DRIVE PORTFOLIO, BURLINGTON$302,720,000 ($328/RSF)Buyer: Starwood Capital

6 KIMBALL LANE, LYNNFIELD$17,750,000 ($169/RSF)

Buyer: Candee Investments

ALFRED STREET PORTFOLIO, WOBURN$14,960,000 ($133/RSF)

Buyer: MLL Capital

20 CABOT ROAD, MEDFORD$31,700,000 ($262/RSF)

Buyer: National Development

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CLASS A & B OFFICE INTERSTATE 495

15.2% DIRECT VACANCY

#1.5% SUBLEASE AVAILABILITY

20.2% TOTAL AVAILABILITY

120,150 SF 12-MONTH ABSORPTION

#$21.10/SF AVERAGE ASKING RATE

• A potential Raytheon and United Technologies merger could

have significant regional real estate implications. Headquartered

in Waltham, Raytheon has offices across suburban

Massachusetts. In fact, the defense giant recently signed a new

134,000 square foot lease at Innovation Drive in Tewksbury.

Raytheon plans to hire 600 for its new Tewksbury office which is

perhaps an indication that the merged companies’ headquarters

will remain in Massachusetts.

• Dana-Farber Cancer Institute will anchor a medical office

building conversion project planned by Marcus Partners in

Methuen. The institute will open a cancer and blood disorder

care and outpatient center for Merrimack Valley patients.

Following an extensive renovation to the property at Five

Branch Street, Dana-Farber will occupy approximately half of

the 95,00 square foot building.

• Pfizer’s campus in Andover is expanding with the completion of

a new 175,000 square foot facility for manufacturing complex

biologics and vaccines. The $200 million GMP facility at One

Burtt Road contains five independent manufacturing suites.

The completion of the GMP facility marks one of many similar

complexes to deliver in the past few years. Demand for the

highly specialized production facilities is very strong; however,

land constraints, huge construction costs, and the high level

of customization makes speculative development essentially

impossible.

• The investment sale market posted modest activity. One Radcliff

in Tewksbury was acquired in an off-market transaction for

$30.9 million or roughly $221 per square foot. The property

was divested by Curo Enterprises and acquired by KAWA

Capital Management, a Florida based investment management

company. The property is currently 100% long-term leased to

L3 Communications. Leading Life Science landlord, King Street

Properties, acquired 1-5 Mountain Road in Framingham for just

over $130 per square foot. The 153,00 square foot office building

is currently occupied by Sanofi and will require a short-term

leaseback while their new home in Cambridge Crossing is under

construction.

CLASS A & B OFFICEINTERSTATE 495

NOTABLE RECENT LEASES

$15.00

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

$23.00

Mass Pike South Northeast

201920182017201620152014201320122011201020092008 6.0%

9.5%

13.0%

16.5%

20.0%

23.5%

27.0%

30.5%

34.0%

Mass Pike

South

Northeast

201920182017201620152014201320122011201020092008

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

Northeast South Mass Pike

ADDRESS TOWN SUBMARKET TENANT SF

Innovation Dr Tewksbury Route 3 North Raytheon 134,000

123 Felton St Marlborough 495 Mass Pike Doble Engineering 79,000

251 Locke Dr Marlborough 495 Mass Pike Candela 50,000

372-376 Merrimac St Newburyport 495 Northeast Mersen 65,000

24 Crosby Dr Bedford Route 3 North Occular Therapeutix 30,000

100 Wearguard Dr Hanover 495 South Universal Environmental 20,000

575 Virginia Rd Concord 495 Route 2 Rize Inc. 16,000

300 Baker Ave Concord 495 Route 2 Beta Bionics 13,000

RECENT INVESTMENT

SALES

1 RADCLIFF ROAD, TEWKSBURY$30,900,000 ($221/RSF)

Buyer: KAWA Capital

1-5 MOUNTAIN ROAD, FRAMINGHAM$20,470,000 ($134/RSF)

Buyer: King Street Properties

209 W CENTRAL STREET, NATICK$6,800,000 ($104/RSF)

Buyer: Legacy Real Estate Ventures

5 BRANCH STREET, METHUEN$10,000,000 ($104/RSF)Buyer: Marcus Partners

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OFFICE REPORT STATS

Office Total Inventory (SF)

Direct Vacancy

Sublease Availability

Total Availability

Quarterly Absorption (SF)

12 Month Absorption (SF)

Average Asking Rate

TOTAL A&B

Inner Suburbs 5,089,000 9.6% 0.4% 15.6% (26,500) 36,000 $42.47

ROUTE 128 60,080,350 10.0% 2.9% 15.9% 578,300 38,350 $29.27

128 West 24,712,800 7.9% 3.1% 14.3% 235,950 264,200 $33.96

128 North 18,523,380 10.5% 1.9% 15.2% 168,450 126,200 $28.57

128 South 16,844,180 12.5% 3.8% 18.8% 173,950 (352,050) $23.14

INTERSTATE 495 42,319,300 15.2% 1.5% 20.2% 5,700 120,150 $21.10

495 Mass Pike West 19,003,500 16.7% 2.0% 21.8% 10,850 6,300 $21.64

495 Route 2 West 6,609,750 21.0% 1.1% 24.9% (38,250) (68,650) $20.15

495 Northeast 5,721,550 16.2% 0.8% 20.9% 113,400 3,950 $20.24

Route 3 North 6,772,500 9.6% 1.7% 17.1% (91,800) (72,300) $21.95

495 South 4,212,050 6.7% 0.1% 10.0% 11,450 250,800 $20.01

TOTAL 107,488,650 12.0% 2.2% 17.6% 557,550 194,450 $26.68

CLASS A

Inner Suburbs 2,751,750 4.5% 0.5% 14.5% (19,050) 26,150 $45.13

ROUTE 128 37,090,350 9.1% 4.0% 16.8% 519,150 2,750 $32.77

128 West 15,180,950 5.9% 4.3% 14.7% 216,050 229,350 $38.37

128 North 12,202,300 10.2% 2.2% 15.7% 131,450 20,500 $31.64

128 South 9,707,100 12.5% 5.5% 21.4% 171,700 (247,100) $25.41

INTERSTATE 495 22,513,350 14.8% 2.1% 20.8% (81,750) (46,400) $22.43

495 Mass Pike West 11,399,050 16.9% 2.5% 22.9% (4,950) (84,700) $22.82

495 Route 2 West 2,649,250 13.1% 2.4% 17.7% 4,850 (11,400) $21.38

495 Northeast 3,173,500 21.5% 1.4% 23.2% 20,600 (44,150) $21.08

Route 3 North 3,699,850 6.9% 2.5% 17.2% (69,300) (14,300) $24.06

495 South 1,591,650 8.0% 0.0% 13.6% (32,900) 108,200 $20.33

TOTAL 62,355,400 10.9% 3.1% 18.1% 418,400 (17,500) $29.58

CLASS B

Inner Suburbs 2,282,050 13.9% 0.2% 15.2% (7,450) 9,850 $39.43

ROUTE 128 22,720,950 10.8% 1.3% 13.7% 46,900 87,300 $25.49

128 West 9,407,600 10.5% 1.1% 13.5% 7,600 86,600 $29.58

128 North 6,176,300 9.0% 1.3% 12.3% 37,000 105,700 $24.07

128 South 7,137,050 12.6% 1.5% 15.3% 2,250 (104,950) $21.33

INTERSTATE 495 19,738,600 15.6% 0.7% 19.7% 77,750 166,500 $19.78

495 Mass Pike West 7,591,050 16.3% 1.2% 20.1% 15,800 91,000 $20.07

495 Route 2 West 3,960,500 26.3% 0.3% 29.7% (43,050) (57,200) $19.70

495 Northeast 2,548,000 9.6% 0.1% 17.9% 92,850 48,100 $18.79

Route 3 North 3,018,600 13.1% 0.8% 17.2% (32,200) (58,000) $19.85

495 South 2,620,400 5.9% 0.2% 7.8% 44,400 142,650 $19.93

TOTAL 44,741,600 13.0% 1.0% 16.4% 117,150 263,700 $23.68

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.

ETHAN ROBERTDirector of Research 617.951.4160 erobert@lpc.com

CONNOR MALONEYAnalyst 617.951.4141 comaloney@lpc.com