CAMBRIDGE OFFICE & LAB MARKET REPORT

CAMBRIDGE OFFICE & LAB MARKET REPORT SECOND QUARTER 2018

LANDLORD FAVORABLE MARKET CONDITIONS As Greater Boston s preeminent technology and innovation market, Cambridge has become a must have address for the world s leading companies. Cambridge has experienced plunging office and lab vacancy rates which has resulted from an influx of out-of-market users and homegrown institutions. Faced with extreme barriers-to-entry, including occupancy costs and land constraints, the market has become some of the most globally sought real estate. Largely fueled by the explosive growth of the life science, technology & biotech sectors, Cambridge s current economy consists of 232 life science & high tech companies and 692 start-ups many of which are supported by massive amounts of VC and NIH. 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. 3.5% MAY MASSACHUSETTS UNEMPLOYMENT 3.8% MAY NATIONAL UNEMPLOYMENT # $2.6B MA QUARTERLY VC FUNDING (Q1) 2 ND NATIONALLY IN QUARTERLY (Q1) VC FUNDING

MARKET TRENDS $78.00 OFFICE CLASS A ASKING RATE VS. DIRECT VACANCY 18% $72.00 16% GLOBAL DESTINATION World leader in medical innovation and technology advancement $66.00 $60.00 $54.00 14% 12% 10% TECHNOLOGY & INNOVATION HUB Fortune 500 leaders and 1,900 homegrown startups $48.00 $42.00 $36.00 $30.00 8% 6% 4% 2% LIFE SCIENCE SECTION SURGES Huge demand from National and International companies $24.00 2006 2007 2008 2009 2010 2011 2012 Average Asking Rate 2013 2014 2015 2016 Direct Vacancy (%) 2017 YTD2018 0% WHERE IS THE RELIEF? Small and medium size users face historic competition OFFICE CLASS B ASKING RATE VS. DIRECT VACANCY MARKET RATES KEEP RISING Demand out-pacing supply, no relief for price sensitive users $63.00 $58.00 $53.00 18% 16% 14% $48.00 12% COWORKING SPACE DISRUPTING MARKET $43.00 $38.00 10% 8% Tenants like flexibility and shorter term commitments $33.00 $28.00 6% 4% INVESTMENT SALES QUIET Few East & Mid Cambridge assets coming to market, West Cambridge remained active $23.00 $18.00 2006 2007 2008 2009 2010 2011 2012 Average Asking Rate 2013 2014 2015 2016 Direct Vacancy (%) 2017 YTD2018 2% 0%

DIRECT VACANCY RATE BY SUBMARKET West - Office Mid - Office West - Lab East - Office Mid - Lab East - Lab 0.0% none 1.0% 2.0% 3.0% 4.0% 5.0%

CAMBRIDGE OFFICE STATS AT A GLANCE VACANCY 1.7% ABSORPTION 13,450 sf SUBLEASE 4.2% AVAILABILITY 8.5% ASKING RATE $71.14/sf CONSTRUCTION 2,400,000 sf WEST CAMBRIDGE Office $48.68/SF Lab $60.36/SF NNN MID CAMBRIDGE Office $64.36/SF Lab $78.00/SF NNN EAST CAMBRIDGE Office $82.10/SF Lab $79.13/SF NNN

CLASS A & B OFFICE

Last quarter, Philips announced that it would relocate its North American headquarters into 243,000 square feet at the long beleaguered Cambridge Crossing. The good news kept coming this quarter when Philips announced it will take an additional 98,000 square feet at the same 250 North Street property. Current developers, DivcoWest, who began construction on a speculative basis recently announced that they will break ground shortly on the project s second speculative office/lab building which will measure 500,000 square feet. All signs indicate that the long anticipated 5.5 million square foot mixed-use East Cambridge project is finally hitting its stride. After a hotly contested battle for space at 121 First Street, CarGurus announced it has pre-leased 50,000 square feet at the new building. Rumors suggest that CarGurus and WeWork were competing for the boutique office building on the outskirts of Kendall Square. At the moment, the property will be an expansion for CarGurus who are currently located at 55 Cambridge Parkway and Two Canal Park. HubSpot was able to secure additional expansion space and extend its new 65,000 square foot lease at One Canal Park where the software company maintains a large presence across from its headquarters at 25 First Street. Other large tenants looking to grow their presence in the market include Google, Apple and Boeing. Just outside Central Square, X4 Pharmaceuticals recently expanded and extended their presence into approximately 12,600 square at 955 Massachusetts Avenue. Down the block, The Association for International Research (AIR) relocated from 1100 Massachusetts Avenue into 19,200 square feet at 675 Massachusetts Avenue. The volume of investment sales has slowed down significantly over the past year with very few assets coming to market, however, those properties which do come to market are receiving tremendous attention. Most recently, the Davis Companies widely marketed a four building West Cambridge portfolio which was ultimately recapped by Invesco for approximately $364 per square foot. The Davis and Invesco partnership also controls the newly redeveloped 35 Cambridgepark Drive which is reported nearly fully leased. $ 1.7% DIRECT VACANCY $ 4.2% SUBLEASE AVAILABILITY $ 8.5% TOTAL AVAILABILITY #13,450 SF 12-MONTH ABSORPTION # $71.14/SF AVERAGE ASKING RATE

CLASS A & B OFFICE NOTABLE RECENT LEASES ADDRESS SUBMARKET TENANT SF 250 North Street East Cambridge Philips 98,000 255 Main Street East Cambridge Cambridge Innovation Center 90,000 1000 Massachusetts Avenue Mid Cambridge Morning Bright Investments 66,000 One Canal East Cambridge HubSpot 65,000 121 First Street East Cambridge Car Gurus 50,000 675 Massachusetts Avenue Mid Cambridge Association for Int l Research 19,200 955 Massachusetts Avenue Mid Cambridge X4 Pharmaceuticals 12,600 625 Massachusetts Avenue Mid Cambridge Helbling Precision Engineering 5,500 AVERAGE ASKING RATE BY SUBMARKET AVERAGE DIRECT VACANCY BY SUBMARKET $84.00 20.0% $78.00 18.0% $72.00 16.0% $66.00 14.0% $60.00 12.0% $54.00 10.0% $48.00 8.0% $42.00 6.0% $36.00 4.0% $30.00 2.0% $24.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 West Mid East

RESEARCH SPOTLIGHT THE COWORKING EFFECT IN THE LAST 12 MONTHS MAP LABELS LOCATIONS WITH MORE THAN 15,000 SF 1,700,000 SF TOTAL COWORKING SPACE IN BOSTON & CAMBRIDGE 775,000 SF 459,450 SF 368,800 SF * AS % OF MEMBERSHIP WHO S TAKING COWORKING SPACE? * 47% Small Business 25% Mobile Corporate Users 20% Freelancers 63,900 SF 32,200 SF 8% Other EXPLOSIVE GROWTH FROM MOBILE CORPORATE USERS 32,150 SF 30,300 SF 18,900 SF

CLASS A & B LAB

The Cambridge lab market is some of the world s most sought after real estate from both investors and tenants. With a microscopic vacancy rate below 1.0%, market rents and investment sales pricing are pushing historically high. Major life science, biotech and pharmaceutical companies have caused the demand surge while research and academic institutions have strengthened the city s commercial backbone. Over the past three years, approximately 2.1 million square feet of new lab space has been delivered fully leased. The strength of new construction has been supported by the depth of tenant demand which has given developers, like DivcoWest and Alexandria RE, confidence to break ground on speculative basis. Mass Innovation Labs signed a full building lease at 21 Erie Street for 56,000 square feet. The barely four year old incubator has initiated a strong growth plan which recently included its first two leases in Boston at isq Seaport and Boston Landing. Additionally this quarter, Beam Therapeutics signed a 38,200 square foot lease at 26 Landsdowne Street. West Cambridge s successful run continued as the periphery market received inbound demand from both suburban and East Cambridge tenants. Market rumors suggest that The Arc (35 Cambridgepark Drive), which has been fully redeveloped, is now 75%+ pre-leased with rents in the mid $60.00 NNN per square foot range. Around the rotary at Fresh Pond Research Park, Life Biosciences leased 25,000 square feet and Hydra BioSciences signed on for 24,700 square feet at 27 Moulton Street. Looking forward, watch for continued movement within Cambridge as tenants compete for highly desirable and rarely available lab ready space. As the cost of doing business in Cambridge continues rising, many early stage and non venturebacked businesses are being squeezed out into emerging life science locations including Brighton, Watertown, Waltham and Lexington. $ 0.1% DIRECT VACANCY 0.6% SUBLEASE AVAILABILITY $ 0.8% TOTAL AVAILABILITY # 83,550 SF 12-MONTH ABSORPTION # $77.94/SF AVERAGE ASKING RATE

CLASS A & B LAB NOTABLE RECENT LEASES ADDRESS SUBMARKET TENANT SF 21 Erie Street East Cambridge Mass Innovation Labs 56,000 399 Binney Street East Cambridge Rubius Therapeutics 45,000 26 Landsdowne Street East Cambridge Beam Therapeutics 38,200 64 Sidney Street East Cambridge Agios Pharmaceuticals 27,000 Fresh Pond Research West Cambridge Life Biosciences 25,000 27 Moulton Street West Cambridge Hydra Biosciences 24,700 245 First Street East Cambridge Acadia Pharmaceuticals 20,000 1030 Massachusetts Avenue Mid Cambridge Astellas Pharmaceuticals 10,000 AVERAGE ASKING RATE BY SUBMARKET AVERAGE DIRECT VACANCY BY SUBMARKET $85.00 20.0% $79.00 18.0% $73.00 16.0% $67.00 14.0% $61.00 12.0% $55.00 10.0% $49.00 8.0% $43.00 6.0% $37.00 4.0% $31.00 2.0% $25.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018 West Mid East

OFFICE & LAB DEVELOPMENT PIPELINE 238 MAIN STREET Lab 145 BROADWAY Office & Lab 121 FIRST STREET Office 40 THORNDIKE Office VOLPE CENTER Office & Lab 314 MAIN STREET Office 250 NORTH STREET Office & Lab 399 BINNEY Lab

OFFICE & LAB REPORT STATS

Office TOTAL A & B Total Inventory (SF) Direct Vacancy Sublease Availability Total Availability Quarterly Absorption (SF) 12 Month Absorption (SF) Average Asking Rate Cambridge 11,192,850 1.7% 4.2% 8.5% 16,500 13,450 $71.14 East Cambridge 6,051,350 0.7% 4.1% 8.3% (9,350) 20,800 $82.10 Mid Cambridge 3,135,750 1.6% 0.9% 3.3% 9,250 (8,050) $64.36 West Cambridge 2,005,800 4.5% 9.5% 17.6% 16,550 750 $48.68 CLASS A Cambridge 7,360,450 1.8% 5.2% 8.3% 16,250 37,750 $76.50 East Cambridge 5,032,500 0.7% 4.8% 6.6% (10,150) 25,150 $83.72 Mid Cambridge 1,224,500 2.4% 0.9% 3.2% 8,700 1,350 $67.92 West Cambridge 1,103,450 5.9% 12.0% 21.5% 17,650 11,350 $53.13 CLASS B Cambridge 3,832,450 1.5% 2.2% 9.0% 250 (24,350) $60.85 East Cambridge 1,018,850 0.9% 1.1% 16.4% 750 (4,350) $74.13 Mid Cambridge 1,911,200 1.1% 0.9% 3.3% 600 (9,350) $62.08 West Cambridge 902,350 2.9% 6.4% 12.7% (1,100) (10,600) $43.25 Lab TOTAL A & B Total Inventory (SF) Direct Vacancy Sublease Availability Total Availability Quarterly Absorption (SF) 12 Month Absorption (SF) Average Asking Rate Cambridge 14,662,550 0.1% 0.6% 0.8% 22,550 83,550 $78.64 East Cambridge 9,660,700 0.0% 0.6% 0.7% 2,700 (1,250) $79.13 Mid Cambridge 4,336,850 0.2% 0.2% 0.7% --- 89,800 $78.00 West Cambridge 665,050 0.8% 2.0% 2.8% 19,800 (5,000) $75.80 CLASS A Cambridge 12,174,400 0.1% 0.5% 0.6% 2,750 (7,250) $79.34 East Cambridge 9,005,750 0.0% 0.7% 0.7% 2,750 (1,250) $79.50 Mid Cambridge 3,039,550 0.2% 0.0% 0.2% --- (5,950) $79.42 West Cambridge 129,150 0.0% 0.0% 0.0% --- --- $66.00 CLASS B Cambridge 2,662,150 0.3% 0.8% 1.7% 19,800 90,800 $70.32 East Cambridge 654,950 0.0% 0.0% 0.0% --- --- $74.00 Mid Cambridge 1,297,250 0.3% 0.6% 2.0% --- 95,800 $74.67 West Cambridge 709,900 0.7% 1.9% 2.6% 19,800 (5,000) $59.00

ETHAN ROBERT Director of Research 617.951.4160 erobert@lpc.com MARY PATALITA Associate 617.951.4119 mpatalita@lpc.com 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.