ROUTE 128 & INTERSTATE 495 SUBURBAN OFFICEMARKET REPORT

THIRD QUARTER 2019

SUBURBS REMAIN SOLID DESPITE NEGATIVE ABSORPTION TO CLOSE OUT SUMMERGreater Boston’s suburban office and lab market encompasses over 125 million square feet and

consists of eight major submarkets concentrated along Route 128 and Interstate 495. Immense

pressure across the Boston and Cambridge markets has caused tenants to consider suburban

locations for rent relief and future growth opportunities. With Cambridge having near zero

availability and lab space in the area being so expensive, many life science companies are also

looking towards the suburbs to find accommodating lab space. More established suburban

lab markets such as Lexington and Waltham are thriving while relative new comers such as

Watertown, Bedford, and Framingham are being revitalized by strong tenant demand.

While many companies are considering a move to the suburbs, transportation is proving to be

a key issue. Despite the attractiveness of a much expensive suburban location, it is undoubtedly

more difficult to recruit top talent to a non-urban destination. As business-friendly towns seek

to bring new companies in, many will likely take measures to invest in commuter friendly transit

options. Over the next 12 months, watch as both investors and municipalities attempt to work

together in order to create competitive suburban destinations through shuttle programs, tax

incentives and other creative solutions.

2.9%AUGUST

MASSACHUSETTS UNEMPLOYMENT

3.7%AUGUST

NATIONAL UNEMPLOYMENT

$12BMASSACHUSETTS ANNUAL (2018) VC FUNDING

#1NATIONALLY

R&D FUNDING PER CAPITA

MARKET TRENDS

CONTEMPORARY UPGRADES

Landlords must adapt and keep common areas and lobbies fresh

BIG BLOCKSTenants seeking larger blocks of space that

are unavailable in the city

LIFE SCIENCE DESTINATION

Tenants being pushed out of Cambridge

TENANTS FAVOR CREATIVE OFFICE

Creating the Downtown feel in a suburban setting

INVESTMENT SALES REBOUNDING2019 off to a hot start outside of the city

ASKING RATES RISE AGAIN

Inner suburban markets accelerate growth, outer markets steady

$180

$200

$220

$240

$260

$280

$300

$320

Average Asking Rate

201920182017201620152014201320122011201020096.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

Direct Vacancy (%)

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

$23.00

$24.00

Average Asking Rate

2019201820172016201520142013201220112010200912.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

Direct Vacancy (%)

CLASS AASKING RATE VS. DIRECT VACANCY

CLASS BASKING RATE VS. DIRECT VACANCY

Average Asking Rate Direct Vacancy

Average Asking Rate Direct Vacancy

DIRECT VACANCY RATE BY SUBMARKET

0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0%

495 South

128 West

128 North

128 South

Inner Suburbs

Route 3 North

495 Northeast

Mass Pike

Route 2 West

SUBMARKET AVERAGE ASKING RATES

495 North$19.64/SF

Rte-3 North$21.84/SF

I-495/Mass Pike$21.37/SF

495 South$20.12/SF

Rte-2 West$19.47/SF

128 West$33.73/SF

128 North$26.52/SF

128 South$22.97/SF

CLASS A & B OFFICEROUTE 128

#10.3% DIRECT VACANCY

2.9% SUBLEASE AVAILABILITY

#16.1% TOTAL AVAILABILITY

(217,100) SF 12-MONTH ABSORPTION

$28.55/SF AVERAGE ASKING RATE

• Lincoln Property Company received a special permit from the

city of Waltham for the development of a 140,000 square foot

life science facility at 300 Third Avenue. The location currently

houses a 22,000 square foot office building which will be razed

and replaced with four levels of garage parking and four floors of

lab space. Construction is expected to begin early next year and

conclude by mid-2021.

• The Route 128 submarket gained several noteworthy tenants

over the course of the third quarter. National engineering firm

Simpson Gumpertz and Heger moved into 105,000 square feet

at the newly-opened 480 Totten Pond Road facility in Waltham.

Child care provider Bright Horizons agreed to move into an

expanded 130,000 square foot space at Two Wells Ave in

Needham. Cancer researcher Alloplex Biotherapeutics leased

4,700 square feet at Cummings Properties’ TradeCenter 128

complex, and will relocate in September from the SmartLabs

incubator in Cambridge.

• The investment sales market along Route 128 was very busy

over the course of the summer. Battery Global Advisors joined

the ownership structure for a Burlington office property as

part of a $37.8 million recapitalization. RJ Kelly remains the

operating partner following the sale of CrossHarbor’s interest in

the 154,378 square foot 10 and 20 Mall Road property. Boston

Properties acquired 880 and 890 Winter Street in Waltham

for $106 million, or $264 per square foot. The two buildings

total 401,000 square feet and are currently 82% leased. The

acquisition bolsters BP’s already substantial Waltham portfolio.

Questions remain whether the landlord will offer any of the

space as potential lab conversion or maintain as office.

• FrontPoint Management purchased 1440 Main Street in

Waltham from Ferris Development for $15 million, or $228 per

square foot. The 66,000 square foot office was fully leased at the

time of the sale. 20 Maguire Road in Lexington, a 101,000 square

foot building that was purchased by DRA Advisors for $7.5

million, or about $74 per square foot. The property is located

just off Lexington’s thriving Hartwell Avenue life science corridor

where King Street properties recently recapitalized their THINC

portfolio for roughly $800/SF in the low 5.0% cap rate range.

NOTABLE RECENT LEASES

CLASS A & B OFFICE/LABROUTE 128

ADDRESS TOWN SUBMARKET TENANT SF

2 Wells Avenue Needham 128 West Bright Horizons 130,000

480 Totten Pond Road Waltham 128 West Simpson Gumpertz & Heger 105,000

275 Grove Street Newton 128 West TechTarget 75,000

1 First Avenue Peabody 128 North Spire Printing 62,000

10 Front Street Scituate 128 South JCS Realty Trust 20,000

55 6th Road Woburn 128 North Boston Solar 17,500

300 Unicorn Park Drive Woburn 128 North Fitzemeyer & Tocci Associates 13,700

10 State Street Woburn 128 North RISO 12,200

250 First Ave Needham 128 West Gennari Aronson 8,000

1 Kingsbury Avenue Watertown 128 West LeanIX 7,000

$15.00

$19.00

$23.00

$27.00

$31.00

$35.00

2019201820172016201520142013201220112010200920083.0%

6.0%

9.0%

12.0%

15.0%

18.0%

21.0%

24.0%

27.0%

201920182017201620152014201320122011201020092008

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

West South North

RECENT INVESTMENT

SALES

880 & 890 WINTER STREET, WALTHAM$106,000,000 ($270/RSF)Buyer: Boston Properties

1440 MAIN STREET, WALTHAM$15,100,000 ($228/RSF)

Buyer: FrontPoint Management

20 MAGUIRE ROAD, LEXINGTON$7,510,000 ($74/RSF)Buyer: DRA Advisors

10-20 BURLINGTON MALL ROAD, BURLINGTON$37,800,000 ($245/RSF)

Recap: R.J. Kelly & Battery Global Advisors

1

1

4

3

2

3

2

4

CLASS A & B OFFICE INTERSTATE 495

#15.8% DIRECT VACANCY

1.2% SUBLEASE AVAILABILITY

#20.3% TOTAL AVAILABILITY

(512,100) SF 12-MONTH ABSORPTION

$20.78/SF AVERAGE ASKING RATE

• MedTech company Drager Medical Systems will retain its North

American headquarters in Andover after signing a 128,000

square foot lease renewal at 6 Technology Drive. The company

struck an agreement with its landlord for an extensive capital

program to be completed over the next 18 months. PharMerica,

a healthcare company headquartered Kentucky, leased 25,000

square feet at 350 Myles Standish Boulevard in Taunton. In

Concord, The Chenega Corporation signed a lease for just

under 26,000 square feet at 575 Virginia Road. With this new

lease signing, the 222,000 square foot Middlesex Greens office

park is now 90 percent leased.

• The investment sales market across Interstate 495 had a strong

third quarter. Most notably, The TJX Companies purchased

550 Cochituate Road in Framingham for $120 million, or $267

per square foot. TJX plans to renovate the 450,000 square

foot office building in order to create a more dynamic work

environment. Genesis Management Group purchased 290 and

400 Donald J Lynch Boulevard in Marlborough for $15 million,

or a blended $72 per square foot. In Framingham, Shields Health

Care Group purchased 313 Speen Street for $11.5 million, or

$192 per square foot. One Tech Drive in Andover was sold by

Novaya Real Estate Ventures and Wheelock Street Capital to a

local landlord for $8.3 million, or $90 per square foot.

• Transportation continues being a key issues for businesses

looking at space in the suburbs. Certain suburban towns are

seeking to capitalize on this increased demand outside of the city

by taking measures to create easier commutes for employees

of companies located in the suburbs. For example, this summer,

Marlborough’s Mayor asked the city council for a $200,000 seed

to create a new shuttle service. The investment would pay for a

shuttle connecting the commuter rail station in Southborough to

business districts in Marlborough. Over the next several years,

expect to see business friendly towns take increased measures

to alleviate commuting struggles in order to attract more

tenants and bolster tax revenues.

CLASS A & B OFFICEINTERSTATE 495

NOTABLE RECENT LEASES

$15.00

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

$23.00

Mass Pike

South

Northeast

201920182017201620152014201320122011201020092008 0%

5%

10%

15%

20%

25%

30%

35%

40%

Mass Pike

South

Northeast

201920182017201620152014201320122011201020092008

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

Northeast South Mass Pike

ADDRESS TOWN SUBMARKET TENANT SF

6 Tech Drive Andover 495 Northeast Drager Medical Systems 128,000

575 Virginia Road Concord 495 Route 2/West Chenega Corporation 25,800

350 Myles Standish Blvd Taunton 495 South PharMerica 25,000

111 Speen Street Framingham 495 West/Mass Pike DTT Surveillance 12,700

11 Beaver Brook Road Littleton 495 Route 2/West Arradiance 10,400

1 Highwood Drive Tewksbury Route 3 North Cast Navigation 7,900

3 Highwood Drive Tewksbury Route 3 North TTI 7,400

210 Littleton Road Westford Route 3 North MedAcuity 7,000

RECENT INVESTMENT

SALES

550 COCHITUATE ROAD, FRAMINGHAM$120,000,000 ($267/RSF)

Buyer: The TJX Companies

290/400 DONAL J LYNCH BLVD, MARLBOROUGH$15,000,000 ($72/RSF)

Buyer: Genesis Management Group

1 TECHNOLOGY DRIVE, ANDOVER$8,300,000 ($90/RSF)Buyer: Brox Industries

313 SPEEN STREET, FRAMINGHAM$11,500,000 ($192/RSF)

Buyer: Shields Health Care Group

1

1 32

4

3

2

4

OFFICE REPORT STATS

Office Total Inventory (SF)

Direct Vacancy

Sublease Availability

Total Availability

Quarterly Absorption (SF)

12 Month Absorption (SF)

Average Asking Rate

TOTAL A&B

Inner Suburbs 5,089,050 12.7% 0.4% 15.2% (158,150) (162,350) $42.47

ROUTE 128 60,815,900 10.3% 2.9% 16.1% 50,050 (217,100) $28.55

128 West 25,447,250 8.7% 3.0% 15.6% 29,750 (115,300) $33.73

128 North 18,524,500 10.3% 1.7% 14.4% 40,600 (143,400) $26.52

128 South 16,844,200 12.7% 4.0% 18.7% (20,300) 41,600 $22.97

INTERSTATE 495 42,494,000 15.8% 1.2% 20.3% (305,500) (512,100) $20.78

495 Mass Pike West 19,018,000 17.6% 1.5% 22.6% (173,600) (273,200) $21.37

495 Route 2 West 6,609,750 19.7% 1.4% 24.6% 84,450 (7,500) $19.47

495 Northeast 5,881,750 14.8% 0.6% 20.3% 55,700 118,500 $19.64

Route 3 North 6,772,500 14.4% 1.4% 17.3% (325,350) (455,300) $21.84

495 South 4,212,050 5.4% 0.3% 7.8% 53,300 105,450 $20.12

TOTAL 108,398,950 12.6% 2.1% 17.7% (413,650) (891,550) $26.16

CLASS A

Inner Suburbs 2,751,750 10.5% 0.5% 14.3% (164,350) (129,350) $45.13

ROUTE 128 37,090,350 9.6% 4.0% 17.3% (190,500) 173,750 $32.41

128 West 15,180,950 7.0% 4.5% 16.2% (164,500) 116,350 $37.66

128 North 12,202,300 10.3% 2.0% 15.4% (17,600) (34,050) $31.50

128 South 9,707,100 12.6% 5.9% 21.5% (8,400) 91,450 $25.34

INTERSTATE 495 22,520,850 16.1% 1.7% 20.7% (292,450) (578,350) $22.39

495 Mass Pike West 11,406,550 18.3% 2.1% 24.6% (167,100) (315,450) $22.99

495 Route 2 West 2,649,250 10.7% 1.9% 15.8% 62,650 15,000 $20.50

495 Northeast 3,173,500 21.3% 1.0% 23.7% 5,150 (39,550) $21.15

Route 3 North 3,699,850 13.2% 1.8% 16.1% (235,100) (274,750) $23.70

495 South 1,591,650 5.4% 0.0% 6.3% 42,000 36,400 $20.58

TOTAL 62,362,900 12.0% 3.0% 18.4% (647,300) (533,950) $29.35

CLASS B

Inner Suburbs 2,282,050 13.6% 0.2% 14.6% 6,200 12,150 $39.43

ROUTE 128 22,720,950 10.8% 1.3% 13.7% 46,900 87,300 $25.49

128 West 9,407,600 8.4% 1.0% 12.2% 194,250 128,400 $29.71

128 North 6,177,400 8.1% 1.1% 10.3% 58,200 35,450 $21.30

128 South 7,137,050 12.8% 1.4% 15.0% (11,900) (49,850) $21.06

INTERSTATE 495 19,905,800 15.5% 0.6% 19.8% (5,100) 74,200 $19.47

495 Mass Pike West 7,598,050 16.4% 0.6% 19.6% (6,450) 42,250 $19.74

495 Route 2 West 3,960,500 25.7% 1.0% 30.5% 21,750 (22,550) $19.10

495 Northeast 2,708,250 7.2% 0.1% 16.4% 50,550 158,000 $18.33

Route 3 North 3,018,600 15.9% 0.8% 18.9% (82,250) (172,600) $19.85

495 South 2,620,400 5.5% 0.5% 8.7% 11,350 69,050 $20.00

TOTAL 44,909,900 12.5% 0.9% 15.9% 241,650 200,350 $23.13

Lincoln Property Company | 53 State Street, 8th Floor, Boston, MA | 617.951.4100 | LPCBoston.com

Lincoln Property Company’s Suburban Office Report is produced by the Boston Office’s research team in collaboration with our Suburban 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