officeSTATus Summer // 2014 Boston Pops Orchestra July 4th Inside... » Greater Boston records its fifth straight quarter of positive absorption » State Street completes its relocation to the Seaport District » 888 Boylston Street tower set to begin construction next quarter » East Cambridge records highest rents since 2000 » Speculative development occurs along Route 128 » Boston high-end residential development explodes in 2014 Luxury Residences on the Rise in Boston // Page 7 *Unless otherwise noted, all data is as of or for the quarter ended June 30, 2014 and is Transwestern | RBJ data. Economy & Real Estate officeSTATus STOCK MARKET // EMPLOYMENT // ABSORPTION & VACANCY // Equity Indicators US Bureau of Labor Statistics Greater Boston Relative Performance Unemployment rate VacancyVacancy Absorptioonn Relative Performance Unemployment rate Vacancy% Absorptionsf in millions March Relative31, 2014 = 1.00Performance Unemployment% rate % sf in millions March 31, 2014 = 1.00 % %25% sf in millions 2.0 1.10 1.10March 31, 2014 = 1.00 % 25% 2.0 1.10 9% 9% 25% 2.0 9% NationalNational unemployment unemployment rate rate 8% National unemployment rate 1.5 1.05 8% 1.5 1.5 1.05 1.05 8% 20% 20% 20% 7% 7% 7% 1.01.0 1.00 1.0 1.00 1.00 6% 6% 6% 15% 15%15% 0.5 0.50.5 5% 5% 0.95 0.95 5% 0.95 BostonBoston BostonNECTA NECTA NECTAunemployment unemployment unemployment rate rate rate 4% 4% 0.0 0.00.0 4% 10% 10%10% 0.90 0.90 0.90 3%3% 3% (0.5) (0.5)(0.5) 2%2% 2% 5% 5%5% 0.85 0.85 0.85 (1.0) (1.0)(1.0) 1%1% 1% 0% 0% 0% 0% (1.5) (1.5) 0.80 0.80 0.80 0% 0% (1.5) Apr AprJun JunAug AugOct OctDec DecFeb AprFeb Apr 2004 20042006 20062008 20082010 20102012 20122014 2014 Jul Jul JulAugAugAugOctOct OctDecDec DecFebFeb FebAprApr AprJunJun Jun Apr Jun Aug Oct Dec Feb Apr 2004 2006 2008 2010 2012 2014 Index Value 1 Qtr % 4 Qtr % Indicator Value 2 Qtr % 4 Qtr % Vacancy 13.8% S&P 500 1930 +3% +17% Boston NECTA Employed 1,475 +1.3% 1.3% Quarterly Absorption +775,000 sf Morgan Stanley Hi Tech Ix 940 +1% +21% Boston NECTA Unemployed 5.8% -1.4% -0.8% Last Twelve Months Absorption +3.6 Million sf reater Boston’s fifth straight quarter sf build-to-suit project at One Channel business experience, namely its far-reaching Gof positive absorption in the office Center in the Seaport District. Greater transportation system and its access to market continued the region’s strong trend Boston’s last-twelve-months construction some of the country’s finest intellectual of real estate activity, as other economic completion number of 2.5 million sf is the capital. The Greater Boston real estate indicators such as a superb unemployment highest it has been since 2003, and the market continues to benefit from strong rate and the revitalized support from the recent “go-ahead” for 888 Boylston Street regional growth due to its diversified public markets affirmed Boston’s place as (the Back Bay’s first new office tower in employer base and broadly educated one of the most desirable business locations a decade) is indicative of the widespread workforce. Such high caliber companies in the country. The market as a whole has desire to develop even the region’s most have been able to attract significant absorbed 8.5 million sf in the past 3 years, ostensibly dense areas. The Seaport District, investment from both the venture capital and asking rents have reached or remained an area which only recently has begun to community as well as the IPO markets. near record highs for both the old guard leverage both its superior location and its Imprivata expanded its space in Waltham (e.g., Cambridge) and the new (e.g., Newton, stock of inefficient property that was just right before raising $75 million in its initial Wellesley, Seaport District). Premium begging to be upgraded, has been especially public offering, and Wayfair LLC’s $157 properties still rule the landscape, as East active with recent completions for State million venture capital investment occurred Cambridge’s rents pass $60 per sf for the first Street and Vertex Pharmaceuticals and more around the same time that it increased its time since 2000 and Class A buildings in the in the pipeline for upcoming periods. The commitment at Copley Place, where it just Back Bay and Financial District account for Seaport’s construction activity has spread relocated. Major players continue to look 486,000 sf of positive absorption. But Class to other use types as well, as the Legislature for entrées into the Greater Boston market, B properties are benefiting as well in places considers a $1 billion expansion to the as evidenced by Bose’s plans for expansion like downtown Boston, where Class B rents Boston Convention and Exhibition Center as well as Medtronic’s pending $43 billion are growing at a faster rate than their Class A and high-end condo developments sprout purchase of Covidien; it remains to be seen counterparts. up along the waterfront. what impact both will have on the South and West markets. enants absorbed 775,000 sf of office ut-of-town firms like Kayak, which Treal estate in the second quarter of Orecently committed to a lease at 2014, the major driver being the completion Canal Park in Cambridge, continue to and delivery of State Street Bank’s 500,000 value the classic tenets of the Boston area 2 Boston CBD officeSTATus Highlights Vacancy Absorption Absorption% & Vacancy // sf in millions Tenants absorbed 265,000 sf of space as vacancy remained stable at 10.3 percent Central16% Boston 1.0 14%Vacancy Absorption 0.8 Vacancy% Absorptionsf in millions despite increase to supply, with Back Bay Class A high-rise rents hitting mid $70s to % sf in millions 0.6 16%12% 1.0 16% 1.0 14% 0.8 0.4 low-$80s. 14%10% 0.8 0.6 12% 0.2 0.6 12% 8% 0.4 10% 0.4 0.0 10% 6% 0.2 State Street Bank moved into its new built-to-suit facility in Channel Center, adding 8% 0.2 (0.2) 0.0 8% 4% 6% 0.0 (0.4) (0.2) 500,000 sf of positive absorption to the Seaport while causing 430,000 sf of negative 6% 4%2% (0.2) (0.4) (0.6) 4% (0.4) absorption in Midtown. 2%0% (0.6) (0.8) 2% (0.6) 0% 2004 2006 2008 2010 2012 (0.8)2014 0% 2004 2006 2008 2010 2012 2014 (0.8) Class A properties in the Financial District and Back Bay drove 486,000 sf of 2004 2006 2008 2010 2012 2014 positive absorption in the past quarter; their Class B counterparts accounted for CURRENT DATA Vacancy 10.3 % 188,000 sf of negative absorption. Quarterly Absorption +265,000 sf Last Twelve Months Absorption +1.3 Million sf Class B asking rents have grown $6.56 per sf, or 23.6 percent, in the past 3 years. Class A Asking Rates // Wayfair expanded into 170,000 sf at Copley Place, while Rapid7 moved into 46,000 Central Boston sf at 100 Summer Street, Pri-Med took 44,000 sf at 111 Huntington Avenue and Class A Asking Rent FINANCIAL DISTRICT per Classsf per year A Asking Rent BACK BAY $80Class A Asking Rent FINANCIAL DISTRICT VMTurbo moved into 23,000 sf at 500 Boylston Street. per sf per year FINANCIALBACK DISTRICT BAY $80per sf per year BACK BAY $80 $70 $70$70 Localytics relocated its headquarters into 19,000 sf at 101 Arch Street. $60 $60$50$60 888 Boylston Street, the Back Bay’s first new office tower in more than a decade, $50$40$50 is set to begin construction in Q3. $40$30 $40 2004 2006 2008 2010 2012 2014 $30 The Rockefeller Group and Mitsubishi Estate New York purchased 28 State Street CURRENT$302004 AVERAGE2006 ASKING RATES2008 2010 2012 2014 2004 2006 2008 2010 2012 2014 ($345 million, 572,000 sf, $602.99 per sf). Central Boston $51.65 Financial District $49.48 Back Bay $59.21 % change in occupied sf since Q2 2009 Seaport Keeps80% Itself Occupied // 70% TW | RBJ BOSTON DEAL Changes in occupied% 60%change in sf occupied by Boston sf since submarket Q2 2009 in the past 5 years 80% 50% % change70% in40% occupied sf since Q2 2009 80% 60% 30% 70% 50% 20% 60% 40% 10% 30% 0% 50% 20% -10% 40% • Cambridge Innovation Center, 10% -20% 30% 50 Milk Street | Boston 0% FD BB 20% Mid SEA -10% Boston 10% -20% Longwood • Transwestern | RBJ acted as Inner SuburbsSouth StationNorth Station Charlestown 0% FD BB Mid SEA a landlord representative -10% Boston -20% Longwood for Ponte Gadea Group in Inner SuburbsSouth StationNorth Station Charlestown FD BB connection with a lease Mid SEA Boston agreement. Longwood Inner SuburbsSouth StationNorth Station Charlestown • 70,000 sf 3 Cambridge officeSTATus Highlights Absorption & Vacancy // Cambridge Vacancy dipped to 6.6 percent on 73,000 sf of absorption as Class A asking rents Vacancy Absorption % Vacancy sf inAbsorption thousands continued to surge upward, increasing $3.74 to $56.77 per sf. 25% % sf in thousands600 25% 600 500 20% 500 20% 400 Mid Cambridge’s vacancy has averaged 1.6 percent since the beginning of 2012. 400 300 15% 300 15% 200 200 10% 100 10% East Cambridge rents passed $60 per sf for the first time since 2000; they have 100 0 5% 0 grown at a rate of $5.76 per year since 2010.