TRENDS IN the real estate market 2016 WELCOMING REMARKS Tom Hynes, Co-Chairman KEYNOTE ADDRESS Charlie Baker Governor of Massachusetts PLACEMAKING from concept to reality THE BOSTON MARKET Ron Perry, President 1.75M Rendering by Neoscape 3rd Tallest Building High End Rents Topping $80/RSF H “General Electric to select Boston as new global headquarters”. E “Boston’s biggest office sale this year just closed – for $1.3 billion [500 A Boylston & 222 Berkeley Street]”. D L “It’s official: Putnam Investments making big move to 100 Federal St. ” I “Boston Globe will move HQ to downtown office N [53 State Street]”. E “As Pier 4 develops, Tishman Speyer makes another South Boston S play [One Channel Center - $316.5M]”. K E Y S T vacancy net absorption A T 8.9% 2.1M RSF S K E Y rental rates S T $48-$80 $38-$52 $65-$85 A T S T Back Bay Financial District O W E R Vacancy 5.9% 20th Floor 5.6% S T 6.6% 3.1% U D Y V 5M RSF 30% E L O 250K RSF 250K RSF 250K RSF 200K RSF 175K RSF C One Boston Place 100 Federal Street Landmark Center 125 High Street Schrafft Center I T Y 85K RSF 150K RSF 125K RSF 120K RSF 110K RSF Innovation & Design 125 High Street 1325 Boylston Street 333 Summer Street Landmark Center Building T E N 4M RSF 7 options > 100K RSF A N T S 600K RSF 250K RSF 200K RSF 125K RSF 100K RSF I N M A R K 100K RSF 90K RSF 75K RSF 75K RSF 65K RSF E T =Committed Tenants suburban M 1M RSF I G R destination: boston A T suburban I O N N E W recently completed [office] D E 680K RSF V E L O P M E N 101 Seaport Boulevard 1325 Boylston Street T Skanska Samuels & Associates S 440K RSF 240K RSF 17 Floors 11 Floors N E W under construction [office] D E 1.7M RSF V E L O P M E 888 Boylston Street 100 Northern Avenue 121 Seaport Boulevard 140 Northern Avenue N Boston Properties The Fallon Company Skanska Tishman Speyer T 425K RSF 515K RSF 400K RSF 350K RSF S 17 Floors 17 Floors 17 Floors 13 Floors Q2 2017 Q2 2016 Q1 2018 Q1 2018 N E W D E V permitted E L O 3.5M RSF P North Station (100 Causeway Street) One Congress Street M Hub on Causeway Congress Square E Boston Properties N 350 Boylston Street 500,000 RSF T Ten Fan Pier S 80 East Berkeley Street Tremont Crossing N E W D E V E proposed L O 4M RSF P Harbor Garage Project M 111 Federal Street Harbor Garage Project E 650 Atlantic Avenue (South Station) The Chiofaro Company N 300 Northern Avenue 700,000 RSF T 6 Tide Street S 2 Harbor Street F 8.9% O R 6.6% E C A S T 2016 Predictions Speculative Upward Pressure ? Development On Rents ? Building Sales Workplace Continue! Evolves… THE CAMBRIDGE MARKET Joe Flaherty Executive Vice President & Managing Partner Lab Market – 9.7M SF 1,50020% 1,500 1,280 18% 18.7% 1,050 1,00016% 16.4% 1,000 14% 485 SF (000s) 50012% 500 10% 10.3% 9.0% 8%0 0 6% -74 (500)4% (500) 2% -549 3.0% (1,000)0% (1,000) 20112011 20122012 20132013 20142014 20152015 Vacancy Absorption V Lab Market 2,250 2,108 E 2,000 308 1,750 L 1,500 1,450 1,280 1,240 1,250 1,200 420 139 237 O 1,000 370 SF (000s) 1,800 C 750 500 1,030 910 1,061 1,003 I 250 0 T 2011 2012 2013 2014 2015 Y New Leases Renewals V Lab 2.1M SF - 44 transactions Big Bio 6.6% E Big Pharma 24.1% L 2 295K SF 253K SF 208K SF 6 O C 2 131K SF 105K SF 83K SF Institutional I 34 6.2% 80K SF 78K SF 64K SF T Emerging Biotech Y 63.1% 58K SF 57K SF 43K SF Leasing forward 295,0000 SF Lease signed Q1 2015 675 West Kendall Street Planned Occupancy Q1 2019 Lab 1M+ SF T Service Provider E 12.0% Institutional 200K SF 126K SF 125K SF 1 2.9% N 1 Emerging A Biotech 85.1% 80K SF 75K SF 65K SF N 16 A 60K SF 50K SF 40K SF Big Pharma: 0.0% T Big Bio: 0.0% S 35K SF 30K SF 25K SF in the MARKET Class A Asking Rents - NNN EAST CAMBRIDGE 93% of lab market 610 Main Street Year 1: $75 +3% annual increases 10-year Average: $86 75 Sidney Street 2015 Increase: +16% 2014 Increase: +15% 100 Binney Street Office Market - 11.5M SF 80012% 800 10.5% 700 9.9% 686 700 10% 9.0% 600 8.7% 600 5008% 493 500 SF (000s) 400 6.2% 400 6% 277 300 244 300 2004% 200 100 100 2% 0 -62 0 (100)0% (100) 2011 2012 2013 2014 2015 Vacancy Absorption Core Kendall Square – 3.6% Office 1.6M SF – transactions V 44 Consult/Fin Service Provider E 6.8% 2.3% Big Pharma Institutional 4 20.1% 251K SF 185K SF 165K SF L 11.1% 6 2 O 4 109K SF 69K SF 67K SF C 12 I 16 Emerging 60K SF 60K SF 58K SF Biotech T 15.3% Y Tech/Software 44.4% 48K SF 41K SF 40K SF Key Transactions 25 First Street & 2 Canal Park 50 Binney Street 75 Binney Street 185,000 & 60,000 SF 251,000 SF 165,000 SF Extension & Adjacent Build-to-Suit Sublease Expansion Office 1.75M SF T Consult/Fin T Service Provider 7.4% Big Bio 6.0% E 25.1% E 600K SF 350K SF 250K SF Institutional 3 N 1.2% 5 N 1 3 A A 125K SF 80K SF 60K SF N A 8 T 50K SF 35K SF 35K SF T Tech/Software S 60.3% S 25K SF 20K SF 20K SF in the market Class A Asking Rents - Gross Kendall Square East Cambridge Alewife One Main Street 55 Cambridge Parkway 150 Cambridge Park Drive Year 1: $78 Year 1: $72 Year 1: $45 $1.00 annual increases $2.5% annual increases $1.00 annual increases 7% 8% 0% H I G 75 Binney Street 50 Binney Street One Broadway H Confidential Tenant R 163,358 RSF 251,234 RSF 8,598 RSF E $91/SF gross $85/SF gross $86/SF gross N average average average T 10 year term 13 year term 10 year term TI: $80/RSF TI: $80/RSF TI: $20/RSF S New building. Build-to-suit Renewal Sublease Supply Gap What about new developments? Northpoint DivcoWest $291 Million 45 acre mixed-use project 2,100,000 SF of commercial space 2,400,000 SF of residential space Kendall Center UPZONING: Office: 600,000 SF Residential: 400,000 SF Residential Kendall Square Initiative Office/Lab: 940,000 SF 5 3 2 360,000 SF 280,000 SF 300,000 SF Volpe Transportation Center GSA Disposition Process City Rezoning Effort 14 acres Transformation to mixed-use area Office/Lab: 1.7M SF Residential: 1.1MSF THE SUBURBAN MARKET Jim Elcock Executive Vice President & Managing Partner S U B U R B A N P U L S E w ithout the Urban Cost i t all begins with R etail from the ground up changing the landscape 8%-12% increase in RENTS E C O N O M I 85K SF proposed office building with street-level retail C S $37 - $39/SF $50-55/SF E C O N O M I 85K SF proposed office building with street-level retail C S $37 - $39/SF $50-55/SF E C O N O M I C S $37 - $39/SF $50-55/SF Don’t call me an Uber…… I’ll walk M I C R O M O 0.5 miles V 1 minute E drive-time S M I C R O M O 1.4 miles V 8 minute E drive-time S M I C R O M O 1.8 miles V 5 minute E drive-time S M I C R O M O 1.6 miles V 4 minute E drive-time S M I C R O M O 7 miles V 13 minute E drive-time S M I C R O M O 1.3 miles V 3 minute E drive-time S Suburbs vs. Boston K E Y supply absorption vacancy S T A 16.5% SF T 134M SF 3M SF average S H I $22 G H $28 W A $51 T $25 E $30 $25 $23 R M A $22 R K RENTS SPEC CONSTRUCTION premium space construction costs build-to-suits 23 spaces >100K SF is still available are increasing will continue BUILD-TO-SUIT ECONOMICS 400 First Ave 1265 Main St 10 CityPoint 275 Wyman Needham Waltham Waltham Waltham $33/SF NNN $33/SF NNN $34/SF NNN $37/SF NNN 16 year term 15 year term 15 year term 11 year term TI: $60/SF TI: $75/SF TI: $70/SF TI: $50/SF MERGERS & ACQUISITIONS INNER SUBURBAN VIBE young companies public transportation want cool space is the KEY TENANTS BECOMING OWNERS 1M+ SF 193K+ SF 330K SF Fall River Westborough Taunton 650K SF 160K SF Taunton Danvers O N E S Cross Point Needham Crossing Lowell Needham T O W A T 191 Spring Street mill & main C Lexington Maynard H 115 Hartwell Avenue Lexington SPEC LAB 80,000 SF $45/SF NNN 115 Hartwell Avenue Lexington SPEC LAB 80,000 SF $45/SF NNN 115 Hartwell Avenue Lexington SPEC LAB 80,000 SF $45/SF NNN 115 Hartwell Avenue Lexington SPEC LAB 80,000 SF $45/SF NNN 200 Smith Street Waltham SPEC Improvements 400,000 SF O TENANTS N E S T O W A T C H 400,000 SF build-to-suit relocate renew in Burlington to Lowell in Chelmsford SUBURBAN PULSE THE CAPITAL MARKETS Kevin Phelan, Co-Chairman Interest Rates 2006-Current 10 Year Treasury 1 Month LIBOR Prime 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2006 2008 2010 2012 2014 CMBS Spreads March 2014 – November 2015 145 +600 135 +550 125 +500 115 +450 Classes 105 - +400 95 +350 85 BBB CMBS CMBSAAA (10Y) Classes 75 +300 65 +250 03/2014 06/2014 09/2014 12/2014 03/2015 06/2015 09/2015 D Deals Closed in 2015 Included : O $92.2M W $100M $62.3M Boston, MA Multi-State Portfolio Miami, FL Class A Office/Industrial Grocery-Anchored 60K SF N 2+M SF Lifestyle Center CONSULTING FIXED RATE FIXED RATE T ASSIGNMENT O W $135M $80M $33.5M 27 Asset Portfolio Multi-State Portfolio Charlotte, NC Financing Apt/Office/Industrial Grocery-Anchored Retail N Industrial 1.5M SF 150K SF 3M SF FIXED RATE 15- YEAR FIXED RATE RESURGENCE5-YEAR FIXED 2015 Capital Markets Closings Originated by Colliers International Boston Office 21 States THE INVESTMENT MARKET Doug Jacoby Senior Vice President I N investors STILL love Boston V E 2014 & 2015 S T M E N T stability & human capital durability of dynamic S at Colleges & Education, growth A Universities Financial and potential in L Healthcare Life Sciences E sectors S Sales by Total $ (mil) 2015 $25 K overall sales E $20 Y volume $15 S $10 billion $10 T A $5 33% below T $0 S peak of 2007 05 06 07 08 09 10 11 12 13 14 15 Rolling 12 Month Total Quarterly Volume Sales by Total $ (mil) $25 K E $20 Y slightly $15 S $10 T over 2014, but still A 42% higher than $5 T average from 11’-13’ $0 S 05 06 07 08 09 10 11 12 13 14 15 Rolling 12 Month Total Quarterly Volume Average Price ($) PSF average sales $300 K price E $250 Y $265/SF $200 S $150 T $100 A $50 T 15% higher 10% higher than than S $0 2007 peak last year 05 06 07 08 09 10 11 12 13 14 15 Boston PSF F O R E 04’ 05’ 14’ 15’ I G N C $1.4 B A $7.2 B P I T A 419% increase L F O the WANT factor R E I G N C A P I T A SAFETY dynamic growth potential in Life Sciences L F O R what they HAVE E I G N C A P I T A PATIENCE MONEY L F …buying O THEN R E American Realty Financial I 04’ 05’ G N C A …buying NOW P I T 14’ 15’ A L class A sales B O S 500 Boylston Street & 222 Berkeley Street Seaport Square (Land) T 1 Channel Center O N $1.3 B $316.5 M $359 M $1,004.52/SF $630.92/SF $128/SF FAR class B sales B O S 50 P.O.