CAMBRIDGE OFFICE & LAB MARKET REPORT

CAMBRIDGE OFFICE & LAB MARKET REPORT FIRST QUARTER 2018

MUST HAVE LOCATION & INNOVATION HUB As Greater Boston s gateway market, Cambridge is a magnet for intellectual capital, innovative minds and technological advancements. The Cambridge market has experienced plunging office & lab vacancy rates and rapidly rising rents which make it one of the world s premier locations despite the significant barriers to entry. Tenant demand is largely coming from the expansion of existing tenants, the inward migration from out-of-market users and the explosive growth of the life science & 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 funding. Looking forward, Cambridge s future remains extremely bright with a deep concentration of intellectual and investment capital keeping the market fueled and extreme land constraints limiting future development. 3.5% FEBRUARY MASSACHUSETTS UNEMPLOYMENT 4.1% FEBRUARY NATIONAL UNEMPLOYMENT # 3.3% MA QUARTERLY GDP GROWTH 2 ND HIGHEST GDP PER CAPITA NATIONALLY

MARKET TRENDS $78.00 OFFICE CLASS A ASKING RATE VS. DIRECT VACANCY 27% $72.00 24% $66.00 21% GLOBAL DESTINATION World leader in medical innovation and technology advancement $60.00 $54.00 $48.00 18% 15% 12% TECHNOLOGY & INNOVATION HUB $42.00 $36.00 9% 6% Fortune 500 leaders and 1,900 homegrown startups MARKET RATES KEEP RISING $30.00 $24.00 2006 2007 2008 2009 2010 2011 2012 Average Asking Rate 2013 2014 2015 2016 Direct Vacancy (%) 2017 YTD2018 3% 0% Demand continued out-pacing supply, contemporary space only COWORKING SPACE DISRUPTING MARKET Tenants like flexibility and shorter term commitments $63.00 OFFICE CLASS B ASKING RATE VS. DIRECT VACANCY 18% LIFE SCIENCE SECTION SURGES Now represents over 70% of R&D demand $58.00 $53.00 $48.00 16% 14% 12% WHERE IS THE RELIEF? $43.00 $38.00 10% 8% Small and medium size users face historic competition $33.00 6% $28.00 4% INVESTMENT SALES ARE HOT New landlords are paying record pricing $23.00 $18.00 2006 2007 2008 2009 2010 2011 2012 Average Asking Rate 2013 2014 2015 2016 Direct Vacancy (%) 2% 0% 2017 YTD2018

DIRECT VACANCY RATE BY SUBMARKET West - Office West - Lab Mid - Office East - Office Mid - Lab East - Lab 0.0% none 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

CAMBRIDGE OFFICE STATS AT A GLANCE VACANCY 2.2% ABSORPTION 19,950 sf SUBLEASE 5.2% AVAILABILITY 9.3% ASKING RATE $69.76/sf CONSTRUCTION 2,400,000 sf WEST CAMBRIDGE Office $46.43/SF Lab $58.55/SF NNN MID CAMBRIDGE Office $63.76/SF Lab $76.89/SF NNN EAST CAMBRIDGE Office $81.34/SF Lab $76.81/SF NNN

CLASS A & B OFFICE

The most notable and largest transaction this quarter occurred at the newly re-branded Cambridge Crossing where Philips disclosed they will relocate their North American research headquarters into 243,000 square feet at the under construction 250 North Street. The commitment from Philips marked the development s first major commercial tenant and will hopefully kick-start leasing momentum at the sprawling 5.5 million square foot mixed-use East Cambridge project which has been long anticipated. Within East Cambridge and Kendall Square, Boston Properties quickly backfilled the former Microsoft space at 255 Main Street when Cambridge Innovation Center leased 90,000 square feet. Market rumors suggest that the vacancy was hotly contested between CIC and WeWork, however the homegrown coworking incubator ultimately secured the space. WeWork remains on the hunt for space within Cambridge with their eyes now reportedly set on 121 First Street. Not surprisingly, they are not the only tenant circling the 58,000 square foot new development. CarGurus, currently located in 55 Cambridge Parkway and Two Canal Park is also actively in discussions for the new building. In Mid Cambridge just beyond Central Square, Morning Bright Investments signed a 66,000 square foot lease at 1000 Massachusetts Avenue. The Chinese economic development firm will occupy nearly two thirds of the building and it will house incubator space for Chinese startups looking to create or expand their American presence. Across the street at 955 Massachusetts Avenue, X4 Pharmaceuticals recently expanded and extended their presence into approximately 12,600 square feet. The Association for International Research (AIR) relocated from 1100 Massachusetts Avenue into 19,200 square feet at 675 Massachusetts Avenue. Despite few investment sales opportunities hitting the market over the past six months, investor appetite remains as strong as ever before. Asset pricing is exceeding historic peaks well above $1,000 per square foot on many occasions and stabilized cap rates are in the 4.0% to 5.0% range. $ 2.2% DIRECT VACANCY #5.2% SUBLEASE AVAILABILITY #9.3% TOTAL AVAILABILITY #19,950 SF QUARTERLY ABSORPTION # $69.76/SF AVERAGE ASKING RATE

CLASS A & B OFFICE NOTABLE RECENT LEASES ADDRESS SUBMARKET TENANT SF 250 North Street East Cambridge Philips North America 243,000 255 Main Street East Cambridge Cambridge Innovation Center 90,000 1000 Massachusetts Avenue Mid Cambridge Morning Bright Investments 66,000 675 Massachusetts Avenue Mid Cambridge Association for Int l Research 19,200 55 Cambridge Parkway East Cambridge Beigene 15,000 955 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. Alexandria RE began construction at 399 Binney Street on a speculative basis and has secured a 45,000 square foot commitment from Rubius Therapeutics, leaving only 27,000 square feet available including some lower level space. Mass Innovation Labs who recently signed two leases outside of Cambridge at Boston Landing in Brighton and isq Seaport, also signed a full building lease at 21 Erie Street (56,000 square feet). The Erie Street location marks the companies third expansion this year within Massachusetts which is part a strong growth plan for the barely four year old start-up. Synlogic will expand and relocate its operations from 200 Sidney Street into 41,000 square feet at 301 Binney Street. BioMed was able to move the disease therapeutics company within its 3.1 million square foot local portfolio. The San Diego based lab experts recently disclosed that their New England portfolio is 100% occupied, not surprising given the 0.3% market vacancy rate. 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 formerly peripheral office intensive locations including Brighton, Watertown, Waltham and Lexington. However, over the past few years developers and corporations have invested hundreds of millions of dollars into these markets in order to make them viable long term alternatives to Cambridge. 0.3% DIRECT VACANCY $ 0.6% SUBLEASE AVAILABILITY $ 1.2% TOTAL AVAILABILITY # 8,400 SF QUARTERLY ABSORPTION # $76.01/SF AVERAGE ASKING RATE

CLASS A & B LAB NOTABLE RECENT LEASES ADDRESS SUBMARKET TENANT SF 88 Sidney Street East Cambridge Agios Pharmaceuticals 146,000 21 Erie Street East Cambridge Mass Innovation Labs 56,000 399 Binney Street East Cambridge Rubius Therapeutics 45,000 200 Sidney Street East Cambridge AbbVie 42,000 301 Binney Street East Cambridge Synlogic 41,000 64 Sidney Street East Cambridge Agios Pharmaceuticals 27,000 One Kendall Square East Cambridge Catabasis 18,900 1030 Massachusetts Avenue Mid Cambridge Astellas Pharmaceuticals 10,000 AVERAGE ASKING RATE BY SUBMARKET AVERAGE DIRECT VACANCY BY SUBMARKET $78.00 20.0% $73.00 18.0% $68.00 16.0% $63.00 14.0% $58.00 12.0% $53.00 10.0% $48.00 8.0% $43.00 6.0% $38.00 4.0% $33.00 2.0% $28.00 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 399 BINNEY Lab 250 NORTH STREET Office & 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 10,809,850 2.2% 5.2% 9.3% 19,950 (5,700) $69.76 East Cambridge 5,668,350 1.2% 5.2% 8.4% 64,050 46,950 $81.34 Mid Cambridge 3,135,700 1.9% 0.4% 2.4% (24,650) (16,650) $63.76 West Cambridge 2,005,800 5.3% 12.9% 22.4% (19,350) (36,000) $46.43 CLASS A Cambridge 6,977,500 2.1% 7.1% 9.9% 43,750 (2,650) $75.62 East Cambridge 4,649,500 0.5% 6.2% 7.5% 64,650 43,850 $83.59 Mid Cambridge 1,224,500 3.1% 0.3% 4.0% (13,800) (21,050) $67.92 West Cambridge 1,103,450 7.5% 18.2% 26.5% (7,100) (25,450) $50.56 CLASS B Cambridge 3,832,400 2.4% 1.8% 8.1% (23,800) (3,050) $59.10 East Cambridge 1,018,850 4.6% 0.4% 12.4% (1,000) 3,150 $71.06 Mid Cambridge 1,911,200 1.1% 0.4% 1.5% (10,900) 4,400 $61.10 West Cambridge 902,350 2.7% 6.4% 17.4% (12,250) (10,550) $41.38 Lab TOTAL A & B Total Inventory (SF) Direct Vacancy Sublease Availability Total Availability Quarterly Absorption (SF) 12 Month Absorption (SF) Average Asking Rate Cambridge 14,614,500 0.3% 0.6% 1.2% 8,350 2,050 $76.01 East Cambridge 9,612,700 0.0% 0.2% 0.3% 14,750 (1,050) $76.81 Mid Cambridge 4,336,800 0.2% 1.2% 2.6% 13,400 65,450 $76.89 West Cambridge 665,050 3.7% 2.0% 5.7% (19,800) (62,300) $58.55 CLASS A Cambridge 12,126,450 0.1% 0.3% 0.7% 4,750 (7,050) $77.39 East Cambridge 8,957,750 0.0% 0.2% 0.3% 10,750 (1,050) $77.31 Mid Cambridge 3,039,550 0.2% 0.6% 2.0% (5,950) (5,950) $78.13 West Cambridge 129,100 0.0% 0.0% 0.0% - - $65.00 CLASS B Cambridge 2,488,150 1.2% 1.9% 3.6% 3,600 46,650 $69.29 East Cambridge 654,950 0.0% 0.0% 0.0% 4,000 - $70.00 Mid Cambridge 1,297,250 0.3% 2.5% 3.9% 19,400 71,450 $74.00 West Cambridge 535,900 4.6% 2.5% 7.1% (19,800) (24,800) $57.00

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.