BOSTON OFFICE MARKET REPORT

FOURTH QUARTER 2019 FLURRY OF ACTION WRAPS UP STRONG YEAR

Long considered one of the nation's most historical and steadfast cities, Greater has undergone an evolution over the past decade and become one of the world's most dynamic gateway cities and top tier investment markets. A global icon for its outstanding research universities, medical centers and technological advancement, Greater Boston's expansion has been fueled by its diverse economy and record setting venture capital and NIH funding. Not only has the local population grown at a rate well above the national average, but the job market has kept pace with the state's unemployment rate measuring below three percent. The marked increase in both population and job growth can largely be attributed to over 40% of students from local universities and colleges that are electing to remain in Boston following graduation. Not surprisingly, Greater Boston's workforce has become one of the nation's most youthful, with 35% of its workers between the ages of 20 and 34 compared to the national average of only 20%. The region's strengthening demographics and economy have promoted a transformative phase across the state that has ushered in new retail, residential and infrastructure development that has not been achieved in decades. Looking forward, expect durable market conditions and a diversified economy to guide the region's commercial real estate market to a strong performance over the next several years.

 2.9%  3.5% $11. 5 B #1 NOVEMBER NOVEMBER GREATER BOSTON NATIONALLY NATIONAL VC FUNDING R&D FUNDING UNEMPLOYMENT UNEMPLOYMENT (2018) PER CAPITA CLASS A MARKET ASKING RATE VS. DIRECT VACANCY TRENDS $70.00 16.0% $67.00 14.0% $64.00 12.0% $61.00 GLOBAL DESTINATION $58.00 10.0%

World leader in medical innovation and $55.00 8.0% technological advancement $52.00 6.0% $49.00 4.0% DEMAND PUSHES $46.00 2.0% DEVELOPMENT $43.00 Significant demand has produced a $40.00 0.0% large development pipeline 20192018201720162015201420132012201120102009200820072006

Average Asking Rate Direct Vacancy (%) TECHNOLOGY & INNOVATION HUB Fortune 500 leaders and 1,900 homegrown startups CLASS B ASKING RATE VS. DIRECT VACANCY NEW LIFE SCIENCE HUB $55.00 16.0% As Cambridge fills up, life science tenants look to the Seaport for a new home $50.00 14.0%

$45.00 12.0%

COWORKING SPACE $40.00 10.0% DISRUPTING MARKET Tenants like flexibility and $35.00 8.0% shorter term commitments $30.00 6.0%

$25.00 4.0% TENANTS FAVOR $20.00 CREATIVE OFFICE 2.0% Open layouts, contemporary and $15.00 0.0% collaborative environments 20192018201720162015201420132012201120102009200820072006 Average Asking Rate Direct Vacancy (%) DIRECT VACANCY RATE BY SUBMARKET

Seaport

Midtown

North Station

Financial District

South Station

Back Bay

Charlestown

Fenway

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% QUICK GLANCE MARKET STATS

VACANCY SUBLEASE AVAILABILITY 4.2% 2.0% 11. 5%

ABSORPTION CONSTRUCTION ASKING RATE 1.27MM sf 2.4 MM sf $61.77/sf

North Station North End $55.46/SF Beacon Hill

Financial District Back Bay $62.97/SF $64.67/SF Midtown $50.98/SF

South End $54.58/SF Seaport $65.42/SF CLASS A OFFICE • Following last quarter's announcement from Foundation Medicine that the Cambridge-grown tenant will relocate into 580,000 square $ 2.9% feet at 400 Summer Street in the Seaport, two additional Cambridge tenants noted their expansion plans into Boston. CarGurus has DIRECT VACANCY committed to 11 floors or 275,000 square at Samuels' Parcel 12 location in the Back Bay. The air rights project to be constructed above the Mass Pike will be the first of its kind in four decades and create valuable real estate at the intersection of Massachusetts Avenue and Newbury Street.

• Arguably the first, and certainly the largest tenant to make the transition from Cambridge to Boston, Vertex Pharmaceuticals # 2.3% recently disclosed its intention to lease 256,000 square feet at iSQ where Related Beal recently delivered a fully leased phase one SUBLEASE AVAILABILITY to Smart Labs and PureTech Health. The second phase, which is currently under construction, will reportedly be taken down entirely by Vertex. Given the explosive growth potential of life science tenants, having space under construction is crucial and drives many decisions. For Vertex, there are certainly sites available closer to their existing Fan Pier campus, however without permits and shovels in the ground there is an air of uncertainty and a 1-2 year delivery lag which is unacceptable to fast paced life science industry. # 11.9 %

• As recently as 24 months ago, some locals fretted over the Back TOTAL AVAILABILITY Bay's future, however the stalwart market proved its merit having absorbed 894,000 square feet over the past years and now measuring a vacancy rate below two percent. Plagued by massive relocations to Downtown and the Seaport, the gaping holes have been backfilled by the likes of Wayfair, Draft Kings, Drift and WeWork. During the fourth quarter, both Draft Kings and Drift expanded by roughly 20,000 square feet each. The market gained additional momentum from the relocation announcement by CarGurus noted above as well # 1,417,950 SF as indications from Boston Properties that their redevelopment atop 12-MONTH ABSORPTION Back Bay Station will likely kickoff in early 2020.

• Strong momentum also swept across the Financial District where annual absorption reached 697,000 square feet. Demolition and construction carried on at One PO Square, which may have contributed to Nelson Mullins Riley & Scarborough's decision to relocate their legal offices to 43,000 square feet at when their lease expires next year. While not relocating, LEK Consulting announced a 15,000 square foot expansion at 75 State # $66.80/SF Street which brings their operations to roughly 78,000 square feet. AVERAGE ASKING RATE CLASS A OFFICE

NOTABLE QUARTERLY LEASES

ADDRESS SUBMARKET TENANT SF 400 Summer Street Seaport Foundation Medicine 580,000

Parcel 12 (Mass Ave @ Newbury St) Back Bay Car Gurus 275,000

316-318 Northern Ave (iSQ) Seaport Vertex Pharmaceuticals 265,000

125 Summer Street Financial District Klaviyo 160,000

200 Berkeley Street Back Bay WeWork 87,000

75-81 Arlington Street Back Bay WeWork 68,000

600 Atlantic Avenue Financial District Harvard Management Company 44,000

One Financial Center Financial District Nelson, Mullins, Riley & Scarborough 43,000

222 Berkeley/500 Boylston Back Bay Draft Kings 20,000

222 Berkeley/500 Boylston Back Bay Drift 20,000

75 State Street Financial District LEK Consulting 15,000

AVERAGE ASKING RATE AVERAGE DIRECT VACANCY BY SUBMARKET BY SUBMARKET

$78.00 18.0%

$72.00 15.0%

$66.00 12.0%

$60.00 9.0%

$54.00 6.0%

$48.00 3.0%

$42.00 0.0% 201920182017201620152014201320122011201020092008 201920182017201620152014201320122011201020092008

Financial District Seaport Back Bay 93

Wood Island

28 1

Airport Community College Constitution Wharf

28 Lechmere Portfolio Constitution Wharf Maverick

Battery Airport Terminal C 93 Wharf SUMNER TUNNEL 1 LOGAN AIRPORT Science Park North Station LincolnCALLAHAN TUNNEL RECENT Wharf Central Union Airport Terminal A Wharf Sargents Wharf 90 Airport Terminal B2 Lewis Kendall/MIT Wharf Haymarket Airport Terminal B1 LONGELLOW BRIDGE INVESTMENT Charles/MGH Bowdoin Long Wharf

Government Center Aquarium

y a

State St w n e

MASSACHUSETTS e r

G

INSTITUTE OF TECHNOLOGY 3

y

d e

n

Park St n Rowes e Wharf Downtown K Fan MASS AVE BRIDGE SALES e Crossing s Pier Boston o Commons R NORTHERN AVE BRIDGE Public EVELYN MOAKLEY BRIDGE Pier 4 Garden

Boylston Chinatown South Station Pier 6 Court House TED WILLIAMS TUNNEL Arlington Pier 7 Boston University West 90

Copley Boston University East Boston University Central Tufts Medical Center 20 One Marina Park Blandford ST YAWKEY Kenmore World Trade Center Hynes Convention Ctr HYNES 90 PRUDENTIAL CONVENTION CENTER 90 CENTER Back Bay Silver FENWAY Line PARK 28 Herald ST Way Prudential BOSTON 3 CONVENTION & EXPO CENTER Fenway Back Bay 93 LANDMARK Fens CENTER E.Berkeley ST 1 Symphony Broadway

Union Park ST 9 Massachusetts Ave

28 Northeastern 7 Elkins Street Newton ST City Point Museum Of Fine Arts

Worcester Square

Ruggles Longwood Medical Area Massachusetts Ave

9 Lenox ST Brigham Circle

100 SUMMER STREET ONE MARINA PARK $806,000,000 ($732/RSF) Buyer: Rockpoint Group $482,000,000 ($980/RSF) Buyer: Clarion Partners

CONSTITUTION WHARF PORTFOLIO 7 ELKINS STREET $114,000,000 ($635/RSF) Buyer: Jamestown $28,850,000 ($483/RSF) Buyer: Related Companies CLASS B OFFICE • Despite all the recent turmoil and uncertainty surrounding WeWork, # 6.5% other co-working brands continued more measured and steady growth. Most notably, Knotel has established their first location in DIRECT VACANCY greater Boston at 239 Causeway Street in the thriving North Station submarket. The property, essentially kitty corner to the wildly popular Hub on Causeway destination, will mark Knotel's first foray into Boston. The 26,000 square foot space will hopefully be the first of many, with Knotel executives reportedly having identified other locations across the Back Bay and South End which will likely become additional outposts in 2020. # 1.5% • The Seaport continued its poll position as the rent market leader with average asking rents reaching $60.00 per square foot. Rents are SUBLEASE AVAILABILITY up 22% from three years ago despite vacancy ticking up to roughly 10% following a few musical chair relocations. This quarter, Motif signed a 10,600 square foot lease at 27 Drydock Avenue, Dimella Shafer relocated into 13,800 square feet at 24 Farnsworth Street and Bynder moved into 8,900 square feet at 321 Summer Street from 24 Farsnworth Street.

• Having purchased 451 D Street last year, Related Beal, who $ 10.7% have quickly become one of the larger Life Science landlords in the Seaport, are working diligently to implement a selective lab TOTAL AVAILABILITY conversion plan into the creative office building. The team recently secured three life science leases totaling 22,000 square feet. Silicon Laboratories took 11,000 square feet, Stevanato Group signed for 6,000 square feet and Elektrofi leased 5,000 square feet. The conversion serves as a relief valve for non blue chip lab tenants seeking asylum from Cambridge's stranglehold.

• The Investment Sales market across the Class A & B markets # 144,800 SF performed very well with several large transactions crossing the finish line before year's end. In the Seaport, the building that kicked 12-MONTH ABSORPTION of Fan Pier's success, One Marina Park, was sold by its original developers, the Fallon Company and Barings, to Clarion Partners for $482 million or roughly $1,000 per square foot. In the Financial District, Rockpoint Group acquired 100 Summer Street from Blackstone for $806 million or $732 per square foot. Presumably having worked out the ground lease details, Carr Properties and Starwood reportedly have under contract for $620 million or $680 per square foot. # $52.48/SF AVERAGE ASKING RATE CLASS B OFFICE

NOTABLE QUARTERLY LEASES

ADDRESS SUBMARKET TENANT SF 239 Causeway Street North Station Knotel 27,000 101 Arch STreet Financial District Hopper 18,600 24 Farnsworth Street Seaport Dimella Shafer 13,800 451 D Street Seaport Silicon Laboratories 11,000 27 Dry Dock Avenue Seaport Motif 10,600 38 Chauncy Street Financial District Sungage 9,600 321 Summer Street Seaport Bynder 8,900 15 Court Square Financial District TAC 6,800 18 Tremont Street Financial District Document Technologies 6,500 451 D Street Seaport Stevanato Group 6,000

AVERAGE ASKING RATE AVERAGE DIRECT VACANCY BY SUBMARKET BY SUBMARKET

$00 200

$00 0 $00

20 $400

$400 80

$00 40 $00

$200 00 209208202020204202022020020092008 209208202020204202022020020092008

Financial District Seaport Back Bay OFFICE & LAB DEVELOPMENT PIPELINE

316 NORTHERN AVE PARKSIDE ON A Seaport Seaport

100 CAUSEWAY 88 SEAPORT BLVD North Station Seaport

400 SUMMER STREET 321 HARRISON AVE Seaport South End

TWO DRYDOCK 115 FEDERAL Seaport Financial District OFFICE REPORT STATS Quarterly 12 Month Office Total Direct Sublease Total Absorption Absorption Average Inventory (SF) Vacancy Availability Availability (SF) (SF) Asking Rate TOTAL A&B 72,133,100 4.2% 2.0% 11.5% (235,350) 1,273,200 $61.77 Back Bay 14,949,300 1.9% 2.1% 5.3% 21,250 561,150 $64.67

Charlestown 2,735,650 0.6% 1.3% 5.1% 3,450 54,100 $44.92

Fenway 1,746,0000 0.0% 5.1% 5.1% - 75,950 $56.16

Financial District 35,439,750 5.0% 2.0% 14.9% (71,750) 697,200 $62.97

Midtown 1,961,450 5.4% 0.3% 6.9% (18,900) 66,400 $50.98

North Station 3,313,150 5.3% 2.2% 8.0% 21,500 (67,950) $55.46

Seaport 9,105,450 5.5% 2.4% 16.3% (163,600) (112 ,650) $65.42

South Station 2,882,400 4.6% 0.5% 3.7% (27,250) (1,050) $54.58

CLASS A 46,836,500 2.9% 2.3% 11.9% 21,750 1,417,950 $66.80 Back Bay 11,038,450 1.2% 2.5% 5.4% 11, 50 0 539,700 $68.97

Charlestown 903,750 1.3% 1.4% 7.5% (8,500) 14,050 $46.00

Fenway 1,117,650 0.0% 7.9% 7.9% - 75,000 $62.25

Financial District 25,558,900 4.1% 2.3% 15.7% 32,750 698,750 $67.15

Midtown 1,176,200 6.7% 0.3% 7.5% (15,550) 57,250 $55.50

North Station 1,407,700 4.0% 2.5% 7.3% 27,500 (18,550) $60.88

Seaport 4,279,050 0.3% 1.3% 14.8% - 76,750 $72.40

South Station 1,354,850 1.9% 1.0% 0.0% (25,950) (25,950) $58.25

CLASS B 25,296,600 6.5% 1.5% 10.7% (257,050) (144,798) $52.48 Back Bay 3,910,850 3.9% 0.8% 4.8% 9,700 21,450 $52.52

Charlestown 1,831,850 0.3% 1.3% 4.0% 11,950 40,050 $44.39

Fenway 628,400 0.0% 0.0% 0.0% - - $45.33

Financial District 9,880,850 7.5% 1.2% 12.9% (104,500) (1,500) $52.15

Midtown 785,250 3.5% 0.3% 6.0% (3,350) 9,150 $44.20

North Station 1,905,450 6.3% 2.0% 8.6% (6,050) (49,450) $51.45

Seaport 4,826,400 10.1% 3.3% 17.6% (163,600) (189,400) $59.23

South Station 1,527,500 6.9% 0.1% 7.0% (1,250) 24,950 $51.33 ETHAN ROBERT Director of Research 617.951.4160 [email protected]

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 Boston Brokerage Group. If you have any questions regarding market conditions and the information found in this report, please contact Ethan Robert.