lpc q1 2011 quarter preview

8/7/2019 LPC Q1 2011 Quarter Preview

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REVIEWREVIEWPPBoston OfficeBoston OfficeQ1 2011Q1 2011


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Research

VERVIEWVERVIEWOOQ1 2011

-1, 200, 000 -800, 000 -400, 000 0 4 00 ,0 00 8 00 ,0 00 1 ,2 00 ,0 00

Class B

Class A

Inersae 495

Roue 128

Cambridge

Boson

-1, 200, 000 -800, 000 -400, 000 0 4 00 ,0 00 8 00 ,0 00 1 ,2 00 ,0 00

Class B

Class A

Inersae 495

Roue 128

Cambridge

Boson

2010: Ne Absorpion

YTD 2011: Ne Absorpion

(831,700)

(246,100)

(182,300)

(25,600)

216,400

(282,233)

254,600

84,400

146,200

(436,800)

(13,600)

(314,600)

149,800

(145,700)

15,100

8,700

Greater Boston Office Market

Typically, oice leasing

in he irs quarer ends

o be sluggish due o he

everyday inconveniences

o winer in New England.

2011 coninued he rend

wih Lincoln Propery

Companys research group measuring limied enan aciviy

hroughou he Greaer Boson oice marke. Forunaely, he

overall decline in oal availabiliy and sublease availabiliyare encouraging signs o a recovery despie he increase in

direc vacancy. Since he oal square ooage available o

enans has begun o decrease, pricing or space has begun

o climb. In Boson and Roue 128 he average asking rae

increased, bu in Cambridge and Inersae 495 he rae

dropped slighly, dragging he oal average asking rae down

a ew cens. However, by years end, he oal average asking

rae is expeced o have increased by 5 o 7 percen rom heconclusion o 2010.

As he graph o he le displays, posiive absorpion persised

in he Class B marke in all he markes racked by his research

group, whereas he Class A markes calculaed negaive ne

absorpion. The oal negaive ne absorpion or he quarer

was over 600,000 square ee, bu improvemens in he

job marke and he lack o consrucion in he pipeline willimprove he prospecs or a year-end posiive number despie

he negaive oals delivered in he irs quarer.

Direc Vacancy: 15.1%

Q1 Absorpion: (604,700) RSF

Asking Rae: $26.40/RSF


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Boston

Due o he delivery o

Alanic Whar, he Bosonoice marke aced anoher

wave o negaive absorpion

in Q1 2011. The new

Financial Disric s delivery

cannibalized ha submarke

by causing approximaely

550,000 square ee o negaive absorpion in he irs quarer

aer poaching Wellington Management rom a collecion o oiceowers and Payette Associates rom he Seapor Disric. Over 90

percen o he space hese wo enans have vacaed or he new

Boston Properties ower has ye o be backilled, hus resuling

in negaive absorpion. However, only 85,000 square ee remains

vacan a Alanic Whar due o he 80,000 square oo lease

recenly signed byBrightCove , an Eas Cambridge enan.

Conrary o he Financial Disric, he Back Bay submarke onceagain wen on an absorpion binge wih over 217,000 square ee

absorbed in he irs quarer. Consequenly he growh dropped

ha submarkes vacancy rae o a remarkable 5 percen. 200

Clarendon Sree and 500 Boylson Sree led he charge o

growh wih he ollow ing relocaions: Admirals Bank, Autonomy

Inc. and Veson Nautical, among ohers. Anoher brigh spo in

he irs quarer was posiive absorpion calculaed in he Class

B marke. Incremenal growh rom a slew o asses produced

146,200 square ee o posiive absorpion. As a resul, he Class Bmarkes vacancy rae dropped o 12.2 percen, which remains only

a ew basis poins higher han he Class As 11.9 percen, causing

concern among Class B landlords ha heir enans may begin o

be poached by vacan Class A produc.

Wihou much jusiicaion oher han conidence in he greaer

economy, he Boson oice average asking rae increased o $38.9 4

per square oo. The reason or he rise was mosly aribued o

seep increases measured in he Back Bay (boh Class A and B)and a sligh rise in he Class A Financial Disric average rae. In

addiion o he Back Bay, he Seapor Disrics Class B average

asking rae increased o $27.99 per square oo due o he srong

leasing calculaed in ha submarke. The overall Class B average

asking rae sunk o $28.36 per square oo.

Cambridge

Limied aciviy in he

Cambridge marke in he irs

quarer resuled in a relaively

neural quarer or changes

in vacancy. The oal oice

marke, alhough down only

slighly in he irs quarer, has

allen by over 165,000 square ee year-over-year. The vacancy raedropped in he irs quarer wihou posiive absorpion due o

he lab conversion plans or 1030 Massachuses Avenue. Overall,

uncerainy concerning wo major enans in Cambridge, Genzyme

an d Vertex, who combined lease approximaely 1.5 million square

ee o oice and lab space in Cambridge, has been deerring

aciviy in he marke. Wih he hrea o signiican availabiliies

hiing he Cambridge oice marke, enans ha can aord o

wai are sudying hese enans and weighing heir opions.

Anoher reason or he lack o leasing aciviy a vacan space

was due o he signiican drop measured in he sublease marke

in Cambridge. In he ourh quarer o 2010 he oice sublease

marke measured 2.1 percen or Cambridge. Tha rae plummeed

Sumbling ino 2011








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o 1.3 percen a he end o he irs quarer o 2011 or a measured

decrease o 38 percen. In addiion o he drop in sublease

availabiliy, he overall availabiliy o oice space (including

uure direc opions) has allen more rapidly han vacan space,

rom 15.4 percen in he ourh quarer o 2010 o 13.9 percen.

Thereore, only 0.4% o he space markeed or lease is no sublease

nor vacan, allowing or urher posiive orecass o be ied o he

Cambridge oice marke.

Due o he lack o leasing aciviy a vacan space in Cambridge,

he average asking rae sank slighly o $36.58 per square oo. Eas

Cambridges average asking rae or oice space sayed relaively

neural rom las quarer, whereas he growh spur in rens in MidCambridge in 2010 was undermined slighly in he irs quarer

o 2011 aer ha rae dropped o $37.57. Overall, Cambridges

average asking ren remained less han $3.00 cheaper han he

average or Boson. Thereore, i will no be surprising ha more

Cambridge enans, like Brightcove , our he Boson marke in 2011

as rens remain cyclically low here, bu on he rise in Cambridge.

Route 128

2011 did no begin well or he

Roue 128 oice marke wih

he vacancy rae here climbing

o 16.2 perce n. Year-over-year

all submarkes wihin Roue

128 remained posiive, bu he

irs quarer deal a measuredblow o 164,800 square ee o negaive ne absorpion. A ew

ransacions ha accouned or he loss in occupancy included:

Salary.coms vacancy o 160 Gould Sree in Needham aer

being purchased byKenexa Technology who consolidaed he wo

companies a 343 Winer Sree in Walham; he ull vacancy o 50

Durham Sree in Beverly which was once home o Gordon College

an d Atari; and OneBeacon Insurance Groups markeing o 125,000

square ee a 150 Royall Sree in Canon. On he posiive side,

Jones & Bartlett Learning leased over 55,000 square ee a 5 Wall

Sree in Burlingon.

Sublease availabiliy in Roue 128 dropped o 2.9 percen rom

3.3 percen over he las quarer. A majoriy o he sublease space

was conined o he Class A marke where he oal has allen

slighly o 3.7 percen. Signiican blocks o Class A sublease ha

remained on he marke a he conclusion o Q1 included: J. Jill

Groups 107,300 square ee a 3 Baerymarch Park in Brainree;IBMs 101,900 square ee a 20 Maguire Road in Lexingon; and

InterGens 73,100 square ee a 15 Wayside Road in Burlingon.

Despie an increase in vacanc y, he average asking rae or he Roue

128 marke increased in all submarkes or an average o $21.78

per square oo due o conidence in he economy and growh in

he echnology job secor. Roue 128 Wes jumped back o almos

$25.00 per square oo in Q1 2011 and Roue 128 Souh climbedback over $19.00 per square oo. Alhough here is a seep hike

o reach 2008 rens wihou much absorpion, he increase in he

average renal raes is an excellen signal o a renewed conidence

in he markeplace.

Interstate 495

The irs quarer o 2011 concluded wih Fidelity Investments

announcing ha he company plans o vacae is Marlborough

campus o 300 & 400 Purian Way or operaions in Rhode Island





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and New Hampshire. The

vacancy o he 600,000 square

oo campus will no be el

unil 2012, bu he healh o

he submarke Inersae 495

Mass Pike has already become

a concern. The oal availabiliy

or ha submarke has increased o 26.7 percen. No as high as he

35 percen measured in Roue 2 Wes, bu climbing noneheless.

Despie he negaive news, he Campus a Marlborough was able o

arac an EM Cbacked companyVCE Acadia or over 35,000 square

ee, pushing he oal ne absorpion igure in Inersae 495 Mass

Pike above 63,000 square ee or he quarer.

The Roue 3 Norh submarke, which was ho in 2010, el he

loss o Goodrich Companys 131,000 square ee a 5 Omni Way in

Chelmsord in he irs quarer o 2011, bu he companys 185,000

square ee expansion a 7 & 9 Technology Park Drive in Wesord

was calculaed in 2010. Growh in he echnology secor is likely o

drive absorpion in he Inersae 495 marke in 2011 as companies

such as he ones menioned above coninue o expand, and inancialcompanies, such as Fidelity Investments, are slow o grow in-sae.

The average asking rae or produc in he Inersae 495 marke

has dropped o $17.52 per square oo in he irs quarer o 2011.

Inersae 495 Norheas measured he lowes average asking rae a

$16.30 per square oo, whereas Inersae 495 Mass Pike measured

he highes a $18.19 per square oo.

Signiican Sales in 2011Direc Vacancy: 20.2%



25 Newpor Ave, Quincy

$14,000,000 ($142/RSF)

Buyer: Governmen Properies

Income Trus

Landmark Cener, Boson

$530,500,000 ($348/RSF)

Buyer: Samuels & AssociaesJP Morgan

Properies For Sale

Unicorn Park

600,000 RSF (6 Buildings)

Seller: JP Morgan

Bay Colony, Walham

$185,000,000 ($188/RSF)

Buyer: Boson Properies

343 Winer Sree, Walham

65,800 RSF

Seller: Naional Developmen


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INCOLNINCOLNLLQ1 2011

UUPDATESPDATES2011 Recen ly Compleed Leases

STAG Capital Partners

11,400 RSF99 High Sree, Boson

Tenan Rep. - Kevin P. Malloy & Brendan Miller

Lynch Brewer Hoffman & Fink LLP

7,900 RSF75/101 Federal Sree, Boson

Tenan Rep. - Robero Magno, CPA

Synapse Energy

7,000 RSF485 Massachuses Avenue, Cambridge

Sublandlord Rep. - Tim Laham & Jesse Flynn

Greene, LLP

3,600 RSF33 Broad Sree, Boson

Tenan Rep. - John D. Miller & Jerey C. Moore

VCE Acadia Inc.

38,600 RSFThe Campus @ Marlborough, Marlborough

Landlord Rep. - Kevin P. Malloy & Tim Laham

J.A. Miara Transportation

13,500 RSF844 Woburn Sree, Wilmingon

Landlord Rep. - Rob Cronin

IHS Dialysis, Inc.

11,500 RSFPresidens Place, Quincy

Landlord Rep. - Ellison Paen

About Women by Women

7,000 RSF30 Washingon Sree, Wellesley

Landlord Rep. - Kevin P. Malloy & Tim Laham

Cambridge

Boson

1 propery: 277,800 RSF

3 properies: 287,000 RSF



LPC Thanks

LPC in MA


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Research

ERMINOLOGYERMINOLOGYTTAsking Rental Rate: he dollar per square oo amoun ha

is quoed by he eniy ha is represening he space being

markeed.

Deliveries: newly compleed produc ha was recenly under

consrucion or renovaion ha are available or immediae

occupancy.

Direct: space ha is markeed on behal o he Landlord.

Flex: produc ha is capable o hosing enans ha vary in

heir use o commercial real esae. Including oice, lab, R&D,

warehouse, manuacuring and disribuion enans.

Free Rent: he ime period he enan does no have o pay any

ren, which is agreed upon by he enan and landlord duringlease negoiaions.

Net Absorption: he change in direc vacancy over a measured

ime rame. Includes newly delivered produc ready or

occupancy, bu does no include sublease.

Sublease: space ha is markeed on behal o he curren

Tenan.

Tenant Improvements (T.I.): ypically a dollar per square

oo amoun negoiaed during he lease ransacion ha is paid

o a enan by he landlord, or sublandlord, or he means o

improving he condiion o he agreed upon space.

Total Availability (A.K.A. Overall Availability): all spaceha is available or lease. Includes markeed occupied space,

sublease, and produc under consrucion ha will be delivered

wihin wo (2) years.

Vacant Available: all space ha is currenly available o lease

and immediaely occupy; hereore, space ha is no hosing

a enan. Unoccupied space wih a uure commimen areexcluded.


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