CAMBRIDGE OFFICE & LAB MARKET REPORT

FIRST QUARTER 2019

CAMBRIDGE OFF TO A HOT START ONCE AGAINCambridge star ted 2019 maintaining incredibly low of f ice and lab vacancy rates with

asking rents continuing to move up. Last year, Massachusetts received roughly $12 bill ion

of venture capital funding and lead the nation in R&D funding per capita. Cambridge’s

reputation as one of the world’s premier technology and innovation markets is at the

forefront of driving this growth and funding. With prestigious universities such as Harvard

and MIT deeply embedded in Cambridge’s fabric, some of the world’s most innovative

new companies are eager to expand in or relocate to the tech hub.

Largely fueled by the explosive growth of the life science, technology & biotech sectors,

Cambridge has over one million square feet of spec life science space under development

for delivery between 2019 and 2021; most experts agree that the majority of this space

will deliver to market 100% pre-leased. Looking forward, Cambridge’s future remains

extremely bright with a deep concentration of intellectual and investment capital keeping

the market fueled for years to come.

3.0%FEBRUARY

MASSACHUSETTS UNEMPLOYMENT

# 3.8%FEBRUARY NATIONAL

UNEMPLOYMENT

$12BMASSACHUSETTS ANNUAL (2018) VC FUNDING

#1NATIONALLY

R&D FUNDINGPER CAPITA

MARKET TRENDS

GLOBAL DESTINATIONWorld leader in medical innovation and

technology advancement

TECHNOLOGY & INNOVATION HUB

Fortune 500 leaders and 1,900 homegrown startups

LIFE SCIENCE SECTOR SURGESHuge demand from National and

International companies

WHERE IS THE RELIEF?Small and medium size users face

historic competition

MARKET RATES KEEP RISING

Demand out-pacing supply,no relief for price sensitive users

COWORKING SPACE DISRUPTING MARKET

Tenants like flexibility and shorter term commitments

INVESTMENT SALES PRICING CLIMBING

Properties are setting record pricing

$28.00

$34.00

$40.00

$46.00

$52.00

$58.00

$64.00

$70.00

$76.00

$82.00

Average Asking Rate

201920182017201620152014201320122011201020092008200720060%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Direct Vacancy (%)

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.00

Average Asking Rate

201920182017201620152014201320122011201020092008200720060%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Direct Vacancy (%)

OFFICE CLASS AASKING RATE VS. DIRECT VACANCY

OFFICE CLASS BASKING RATE VS. DIRECT VACANCY

DIRECT VACANCY RATE BY SUBMARKET

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%

East - Lab

Mid - Lab

East - O�ce

West - Lab

Mid - O�ce

West - O�ce

none

none

VACANCY

1.9%

CAMBRIDGE OFFICE STATS AT A GLANCE

SUBLEASE

4.0%ABSORPTION

24,100 sf

ASKING RATE

$75.93/sf

WEST CAMBRIDGE

OFFICE $52.20/SF

LAB $64.36/SF NNN

MID CAMBRIDGE

OFFICE $67.12/SF

LAB $80.43/SF NNN

EAST CAMBRIDGE

OFFICE $88.06/SF

LAB $86.26/SF NNN

AVAILABILITY

10.3%CONSTRUCTION

2.8MM sf

CLASS A & B OFFICE

#1.9% DIRECT VACANCY

4.0% SUBLEASE AVAILABILITY

#10.3% TOTAL AVAILABILITY

24,100 SF 12-MONTH ABSORPTION

#$75.93/SF AVERAGE ASKING RATE

• While many developers are looking to build new space in

order to satisfy demand for office, others are taking a different

re-purposing strategy. New England Development plans to

convert the third floor of the CambridgeSide Galleria Mall

from traditional retail to 140,000 square foot of contiguous

office space. In addition, developers are working on permitting

a mixed-use project that would replace the current Best Buy,

Sears, and Macy’s locations with four buildings that mix office

and lab uses along with ground-floor retail. In addition, the

long-stalled Middlesex Courthouse conversion, which would

create 430,000 square foot of office space as well as 24 income

restricted housing units, is reportedly inching closer to fruition

with some experts believing construction could start by the

end of this year.

• Boston Properties received unanimous approval from the

Cambridge Planning Board and Cambridge Redevelopment

Authority for a 16-story glass tower in Kendall Square. The

building will replace the MIT Coop at 325 Main Street and

Google recently confirmed plans to lease roughly 362,000

square feet. The project could also feature a new entryway

for the MBTA’s Kendall Square station as well as a connection

to Google’s current offices at 355 Main Street. Across the

street, Boston Properties continued construction of 314 Main

Street which will house Boeing, Apple and Capital One when

completed next year.

• As vacancy in Cambridge hovers around two percent and rents

approach triple digits, tenants are more frequently seeking

alternative locations just outside the city’s limits. Areas like

Somerville, Boston and Watertown are legitimate alternatives.

Most recently, Amazon announced that its Alexa Business unit

will lease 50,000 square feet at One Cabot in Medford with

access to the MBTA orange line and the robotics workforce

which tends to cluster north and west of the city. Securing

Amazon is a big win for Medford and lends further credibility

to inner suburban markets which also recently secured a major

relocation and consolidation from Puma into 150,000 square

feet at Assembly Row.

ADDRESS SUBMARKET TENANT SF

325 Main Street East Cambridge Google 320,000

314 Main Street East Cambridge Capital One 78,300

One Main Street East Cambridge Aegerion 31,500

One Main Street East Cambridge Alnylam 23,350

One Main Street East Cambridge Genevant 11,150

One Main Street East Cambridge nFerence 7,600

NOTABLE RECENT LEASES

CLASS A & B OFFICE

$20.00

$27.00

$34.00

$41.00

$48.00

$55.00

$62.00

$69.00

$76.00

$83.00

$90.00

20192018201720162015201420132012201120102009200820070.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2019201820172016201520142013201220112010200920082007

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

West Mid East

OFFICE & LAB DEVELOPMENT PIPELINE

145 BROADWAY Office & Lab

314 MAIN STREET Office

250 NORTH STREET Office & Lab

238 MAIN STREET Lab

400/500 CAMBRIDGE DISCOVERY Office & Lab

325 MAIN STREET Office

350 DAWES Office

450 DAWES Lab

CLASS A & B LAB

0.1% DIRECT VACANCY

0.2% SUBLEASE AVAILABILITY

#0.5% TOTAL AVAILABILITY

# (28,600) SF 12-MONTH ABSORPTION

#$83.54/SF AVERAGE ASKING RATE

• Sage Therapeutics is in early talks to lease anywhere between

250,000 and 350,000 square feet of office at Cambridge

Crossing in DivcoWest’s 45-acre East Cambridge mixed-use

development. Sage’s rumored expansion comes after the U.S.

Food and Drug Administration approved Zulresso, Sage’s drug

to help treat postpartum depression. The Cambridge-based

company currently has 58,000 square feet at 215 First Street

and just over 40,000 square feet at 245 First Street. This would

only add to Cambridge Crossing’s prominence after Sanofi

signed a 900,000 square foot lease at the end of 2018.

• Invaio Sciences, a biomaterials and biotechnology company,

signed a full building lease for 37,500 square feet at 75 Moulton

Street, part of The Davis Companies and Invesco’s Quad

campus. The same ownership team has also commenced a

lab conversion program at the neighboring 10 Wilson Road

property. Meanwhile at their holding on the other side of the

tracks, Syros Pharmaceuticals signed a 53,000 square foot lease

at The Arc on Cambridgepark Drive.

• Back in East Cambridge, Alexandria RE completed its

construction of 399 Binney Street which is home to Celsius

Therapeutics, Relay Therapeutics, and Rubius Therapeutics.

The 165,000 square foot project which began construction on a

speculative basis was quickly pre-leased and becomes the latest

addition to East Cambridge supply.

• Pricing in the investment sale market remained extremely

competitive. HCP purchased a 60% interest of 75-125 Binney

Street for $1,880 per square foot with Alexandria RE remaining

on board. HCP also recapped 87 Cambridgepark Drive in

West Cambridge partnering with familiar friend, King Street

Properties. At $1,110 per square foot the transaction represents

the new highwater mark for the Alewife submarket.

• Perhaps drafting off the success of neighboring Cambridgepark

Drive, Bulfinch Company has begun construction on a

speculative 270,000 square foot lab building that will become

West Cambridge’s newest asset when it comes online.

ADDRESS SUBMARKET TENANT SF

35 & 40 Landsdowne Street East Cambridge Millennium/Takeda 417,100

300 Third Street East Cambridge Alnylam 129,000

301 Binney Street East Cambridge Cyclerion Therapeutics 114,500

35 CambridgePark Drive West Cambridge Syros Pharma 52,900

45 Sidney Street Mid Cambridge BluePrint Medicines 39,400

75 Moulton Street West Cambridge Invaio Sciences 37,500

399 Binney Street East Cambridge Rubius Therapeutics 20,000

NOTABLE RECENT LEASES

CLASS A & B LAB

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

201920182017201620152014201320122011201020092008

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

West Mid East

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.00

$75.00

$80.00

$85.00

$90.00

201920182017201620152014201320122011201020092008

BEHIND THE SCENES WHATS DRIVING DEMAND?

VC INVESTMENT BEING CONCENTRATED INTO FEWER DEALS, BUT TOTAL INVESTMENT GROWING

OFFICE RENTS

55%

IN THE PAST 5 YEARS

MA Funding (2018)

$2.9 BILLION

HIGHER THAN STATEWIDE17%

$83,100MEDIAN HH INCOME

180 BASIS POINTS LOWER THAN NATIONAL AVERAGE

CAMBRIDGE UNEMPLOYMENT RATE

START-UP, TECHNOLOGY & LIFE SCIENCE COMPANIES

TECHNOLOGYINCUBATORS

BOSTON IS THE #2 TOP NATIONAL

STARTUP HUB

15% OF CAMBRIDGE'S TOP 25 EMPLOYERS

LIFE SCIENCE & VC HUB

OFFICE & LAB REPORT STATS

OfficeTotal

Inventory (SF)Direct

VacancySublease

AvailabilityTotal

Availability Quarterly

Absorption (SF)12 Month

Absorption (SF)Average

Asking Rate

TOTAL A & B

Cambridge 11,117,200 1.9% 4.0% 10.3% (20,150) 24,100 $75.93

East Cambridge 6,051,350 1.0% 3.5% 11.5% (6,450) 5,650 $88.06

Mid Cambridge 3,135,700 2.0% 2.5% 5.9% (450) (4,550) $67.12

West Cambridge 1,930,150 4.4% 8.2% 13.9% (13,250) 23,050 $52.20

CLASS A

Cambridge 7,360,450 1.7% 5.3% 7.5% (8,600) 23,300 $81.41

East Cambridge 5,032,500 0.9% 4.1% 5.5% 10,550 (21,250) $89.33

Mid Cambridge 1,224,500 1.0% 4.8% 5.8% - 25,400 $71.08

West Cambridge 1,103,450 5.7% 11.5% 18.4% (19,150) 19,150 $56.75

CLASS B

Cambridge 3,756,700 2.5% 1.5% 16.0% (11,550) 800 $65.18

East Cambridge 1,018,850 2.0% 0.5% 41.2% (17,000) 26,900 $81.75

Mid Cambridge 1,911,200 2.7% 1.0% 6.1% (450) (30,000) $64.58

West Cambridge 826,650 2.5% 3.7% 8.0% 5,900 3,900 $46.13

LabTotal

Inventory (SF)Direct

VacancySublease

AvailabilityTotal

Availability Quarterly

Absorption (SF)12 Month

Absorption (SF)Average

Asking Rate

TOTAL A & B

Cambridge 14,662,550 0.1% 0.2% 0.5% 98,050 (28,550) $83.54

East Cambridge 9,660,700 0.0% 0.1% 0.1% (1,150) 2,850 $86.26

Mid Cambridge 4,336,800 0.4% 0.3% 0.7% 4,900 (5,300) $80.43

West Cambridge 665,000 0.0% 0.0% 5.6% 94,300 (26,100) $64.36

CLASS A

Cambridge 12,174,400 0.1% 0.1% 0.2% (1,150) 2,850 $85.14

East Cambridge 9,005,750 0.0% 0.1% 0.2% (1,150) 2,850 $86.50

Mid Cambridge 3,039,550 0.2% 0.0% 0.2% - - $81.75

West Cambridge 129,100 0.0% 0.0% 0.0% - - $70.00

CLASS B

Cambridge 2,488,100 0.4% 0.5% 2.4% 9,900 19,500 $75.74

East Cambridge 654,950 0.0% 0.0% 0.0% - - $83.00

Mid Cambridge 1,297,250 0.7% 1.0% 1.7% 4,900 (5,300) $77.33

West Cambridge 535,900 0.0% 0.0% 6.9% 5,000 24,800 $63.00

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 Cambridge 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