office status spring // 2013 · 2003 2005 2007 2009 2011 2013 (1.0) (0.8) (0.6) (0.4) (0.2) 0.0 0.2...

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» Converse and Goodwin Procter extend a string of quarters containing major build-to-suit announcements.

» Forty-two percent more properties gained than lost occupancy in the quarter.

» East Cambridge, Back Bay, Framingham and the Seaport District availability is heavily concentrated at few locations.

» Waltham vacancy has dropped to 16.2 percent from 26.7 percent since 2010.

» Newly conceived infill projects in the Back Bay and East Cambridge may be the market’s newest construction proposals.

The Seaport Magic in Numbers // Page 7

*Unless otherwise noted, all data is as of or for the quarter ended March 31, 2013 and is Richards Barry Joyce & Partners data.

officeSTATus Spring // 2013

2

Record stock market performance combined with

robust area employment expectations provided

a backdrop for a buoyant Greater Boston office real

estate market, where 42 percent more buildings

experienced growing rent rolls than shrinkage in the

first quarter of 2013. Despite a limited number of

consolidations and resulting negative absorption of

105,000 sf, area sentiment remains focused on growth

patterns lasting back to 2010, since when tenants have

absorbed 4.8 million sf. Most of this absorption, or 2.6

million sf, has taken place in submarkets representing

just 32 million sf of the region’s 180 million sf invento-

ry, with this sustained demand activity a representation

of a shift in tenants’ desires to locate in, and willing-

ness to pay for, space in the region’s most attractive

areas. Having boasted little availability for many

consecutive quarters, Back Bay and East Cambridge

have been joined by the Seaport District, Framingham

and Waltham, where sustained recent demand trends

have materially shifted the demand/supply balance.

Availability figures for the Back Bay, East Cambridge

and the Seaport District tend to overstate the ease

of finding options for tenants; much of the available

space in these markets is concentrated in a few distinct

properties, offering tenants few distinct choices.

Surging asking rents for space in the Back Bay, East

Cambridge and for the Class B “brick and beam” style

office space in the Fort Point area of the Seaport

District contrast with more stable conditions nearly

everywhere else (except for Waltham, having seen a

small pricing adjustment this past quarter). Asking rents

for the most preferred properties now eclipse $60 per

sf in East Cambridge and $70 per sf in the Back Bay, as

average Class A space in the Back Bay is now priced

23 percent higher than space in the Financial District.

Seaport District Class B asking rents, having remained

at similar levels in the quarter when compared with

year-end figures, face unabated tenant demand for the

product type and rapidly decreasing availability may

substantiate further increase in rents this year.

A ravenous tenant appetite for new product is

supporting the current 95 percent leased 2.6 million

sf pipeline, of which 1.3 million sf will deliver this

year. These facilities will join the five million sf that

have already been delivered this decade and are 95.2

percent leased. These resounding numbers combined

with tenant enthusiasm over certain areas is strength-

ening the momentum of some long-delayed projects

and precipitating new proposals to infill in the region’s

hottest areas. The redevelopment of the Sullivan

Courthouse and a reconfiguration of Cambridge Center

could deliver hundreds of thousands of square feet in

East Cambridge while Boston Properties is exploring

the possibility of an office tower on air rights it owns

over a garage in the Back Bay near the John Hancock

Tower. The delayed Filene’s redevelopment could be

underway this year, if the landlord secures a rumored

anchor tenant.

0%

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25%

2003 2005 2007 2009 2011 2013

(2.0)

(1.5)

(1.0)

(0.5)

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1.0

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2.0

Absorptionsf in millions

Vacancy%

0%

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2%

3%

4%

5%

6%

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8%

9%

Dec Feb Apr Jun Aug Oct Dec

Unemployment rate%

0.85

0.90

0.95

1.00

1.05

1.10

1.15

Apr May Jul Sep Nov Jan Mar

Relative PerformanceDecember 31, 2012 = 1.00

National unemployment rate

Boston MSA unemployment rate

Index Value 1 Qtr % 4 Qtr %

S&P 500 1,558 +9% +10%

Morgan Stanley Hi Tech Ix 682 +8% +2%

0%

5%

10%

15%

20%

25%

2003 2005 2007 2009 2011 2013

(2.0)

(1.5)

(1.0)

(0.5)

0.0

0.5

1.0

1.5

2.0


Vacancy%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%


Unemployment rate%

0.85

0.90

0.95

1.00

1.05

1.10

1.15





EMPLOYMENT //US Bureau of Labor Statistics

Indicator Value 2 Qtr % 4 Qtr %

Boston MSA Employed 1,459 -1.1% +1.2%

Boston MSA Unenemployed 5.4% 0% -0.1%

0%

5%

10%

15%

20%

25%

2003 2005 2007 2009 2011 2013

(2.0)

(1.5)

(1.0)

(0.5)

0.0

0.5

1.0

1.5

2.0


Vacancy%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%


Unemployment rate%

0.85

0.90

0.95

1.00

1.05

1.10

1.15





ABSORPTION & VACANCY //Greater Boston

Vacancy 14.5%

Quarterly Absorption -105,000 sf

Last Twelve Months Absorption 1.6 Million sf

STOCK MARKET //Equity Indicators

CURRENT DATA

Economy & Real Estate officeSTATus

3

Farnsworth, Melcher, Sleeper and

the other street names in the Fort

Point area were officers of the

Boston Wharf Company which

created the area in the early 19th

century by landfill and owned its

buildings up until the 21st century.

Construction Industry Flourishes //Breakdown of the 2.6 million sf construction pipeline

0%

2%

4%

6%

8%

10%

12%

14%

16%

2003 2005 2007 2009 2011 2013

(1.0)

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0.2

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Vacancy%

$30

$40

$50

$60

$70

$80

2003 2005 2007 2009 2011 2013

Class A asking rentper sf per year

FINANCIAL DISTRICTBACK BAY

Absorption & Vacancy //Central Boston

BOSTON FACT

The Boston submarkets experienced negative absorption of 155,000 sf, raising

vacancy 0.3 percent to 11.1 percent as Class A rents increased $0.88 to $50.29 per sf.

Back Bay Class A rents have surged to levels 23 percent above levels presently

seen in the Financial District.

Fifty-five percent of Seaport District vacancy is in just three properties; vacancy

outside these buildings is 8.4 percent.

MFS took occupancy of 280,000 sf at 111 Huntington Avenue from 500 Boylston

Street as Cambridge Associates moved into 170,000 sf at 125 High Street from 100

Summer Street and PayPal took occupancy of 63,000 sf at One International Place.

One Channel Center is under construction in the Seaport District: the 500,000 sf

structure is a build-to-suit project for State Street Corporation.

Converse will relocate its headquarters into 186,000 sf of a larger redevelopment

of Lovejoy Wharf near North Station in 2015 in a move from North Andover.

Goodwin Procter & Hoar has agreed to lease 360,000 sf at One Channel Center,

a 500,000 sf facility to be developed in the Seaport District with construction

expected to begin this fall.

Clarion Partners acquired a six building portfolio in the Seaport District from

National Development ($129.3 million, 407,000 sf, $317 per sf).

PROJECT LOCATION CITY SIZE (SF)

Liberty Mutual 157 Berkeley Street Boston 580,000

Vertex 1-11 Fan Pier Boulevard Boston 550,000

State Street 1 Channel Street Boston 500,000

Biogen Idec 225 Binney St & 17 Cambr. Center Cambridge 495,000

Keurig project 63 South Avenue Burlington 343,000

Speculative Project 78 Blanchard Road Burlington 120,000

Harvard Vanguard Concord Meadows Concord 50,000

0%

2%

4%

6%

8%

10%

12%

14%

16%

2003 2005 2007 2009 2011 2013

(1.0)

(0.8)

(0.6)

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(0.2)

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0.2

0.4

0.6

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Vacancy%

$30

$40

$50

$60

$70

$80

2003 2005 2007 2009 2011 2013


FINANCIAL DISTRICTBACK BAY

Class A Asking Rates //Central Boston

CURRENT AVERAGE ASKING RATES

Central Boston $50.29

Financial District $48.29

Back Bay $59.26

CURRENT DATA

Vacancy 11..5%


Last Twelve Months Absorption 751,000 sf

Highlights

Boston CBD officeSTATus

4

This waterway near Kendall

Square is the Broad Canal, a

lone and truncated remnant

of a complex and active canal

system originating in 1806 that

encompassed much of the area;

all other canals were landfilled in

the 20th century.

-12%

-16%

-29%

-24%

-33%

-36%

-46%

-42%

-50%

-40%

-30%

-20%

-10%

0%

Boston Cambridge Rte 128 I-495

Real Nominal

Real rents adjusted for inflation using Boston CMSA Consumer Price Index

Rents Still a Bargain Compared to ‘01 //Current Class A discount to peak 2001 asking rents CAMBRIDGE FACT

Highlights

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2003 2005 2007 2009 2011 2013

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Absorptionsf in thousands

Vacancy%

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$70

2003 2005 2007 2009 2011 2013


EAST CAMBRIDGE MID CAMBRIDGE WEST CAMBRIDGE

Absorption & Vacancy //Cambridge

Real rents adjusted for inflation using Boston CMSA Consumer Price Index

CURRENT DATA

Vacancy 11..5%



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2003 2005 2007 2009 2011 2013

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2003 2005 2007 2009 2011 2013



Class A Asking Rates //Cambridge


East Cambridge $54.58

Mid Cambridge $49.40

West Cambridge $35.45

Flat absorption of negative 9,000 sf left vacancy stable at 7.9 percent as average

Class A asking rents increased $1.85 to $50.20 per sf.

East Cambridge Class A asking rents have surged more than ten percent in three

quarters with asking rents at $60 per sf for the most preferred properties.

Positive absorption activity has slowed as the most preferred available spaces

near Kendall Square have insufficient available space to support further growth.

Half of all East Cambridge availability is at just four locations.

Nearly 1.6 million sf of tenant growth in the Seaport District is from former

Cambridge, mostly East Cambridge, occupants (see page 7).

More than 70 percent of all Cambridge office buildings are completely full.

The Edward Sullivan Courthouse, shuttered by the state in 2010, could be

redeveloped as a 500,000 sf office building, a project that could begin later this year.

Boston Properties is in discussions with Cambridge city officials to explore an

increase in allowed density at its Cambridge Center property.

Normandy Real Estate acquired a ten-building portfolio of properties near

Central Square ($37.5 million, 164,000 sf, $228 per sf) as O’Connor Capital Partners

bought 55 Wheeler Street ($27.0 million, 126,000 sf, $214 per sf).

0%

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2003 2005 2007 2009 2011 2013

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Vacancy%

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$70

2003 2005 2007 2009 2011 2013



Class A Asking Rates //Cambridge


East Cambridge $54.58

Mid Cambridge $49.40

West Cambridge $35.45

Cambridge officeSTATus

5

The interchange of Routes 93

and 95 in Woburn is the state’s

most congested traffic point,

with 375,000 cars per day; the

40 year-old outdated cloverleaf

design, rare for areas of such

high volume, is expected to be

replaced by 2020.

New Construction is RED HOT //Direct availability by decade of construction 128 FACT

Vacancy remained stable at 16.6 percent on slight positive absorption of 66,000

sf as average Class A asking rents increased $0.29 to $26.94 per sf.

Flat conditions masked a period of strong positive absorption to the West

and South, and negative absorption in the North.

Rent increases in Waltham propelled Route 128 levels higher.

Waltham vacancy has dropped from 26.7 percent to 16.2 percent over nine

quarters as tenants have absorbed more than one million sf.

FM Global took occupancy of 80,000 sf at 1175 Boston Providence Highway

in Norwood, the first new construction delivery along 128 since 2009; Dedham

Medical Associates took the other 80,000 sf at the 160,000 sf facility.

GZA moved into 45,000 sf in Norwood as Citizens Disability took occupancy

of 43,000 sf in Waltham and Propel Marketing moved into 28,000 sf in Quincy;

AECOM pulled out of 85,000 sf in Wakefield as part of a reorganization.

A residential phase of Quincy Center’s $1.2 billion redevelopment is expected

to ultimately include 700,000 sf of office space.

Equus Capital divested 400, 410 and 460 Totten Pond Road in Waltham ($47.0

million, 298,000 sf, $158 per sf) as James Campbell Company purchased 160 Gould

Street in Needham ($26.4 million, 139,000 sf, $190 per sf).

Highlights

0%

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25%

2003 2005 2007 2009 2011 2013

(1,200)

(1,000)

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0200

400

600

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1,000


Vacancy%

$15

$20

$25

$30

$35

$40

2003 2005 2007 2009 2011 2012


ROUTE 128 NORTHROUTE 128 WESTROUTE 128 SOUTH

Class A Asking Rates //Route 128


Route 128 North $25.91

Route 128 West $30.99

Route 128 South $21.04

0%

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25%

2003 2005 2007 2009 2011 2013

(1,200)

(1,000)

(800)

(600)

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0200

400

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1,000


Vacancy%

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$20

$25

$30

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$40

2003 2005 2007 2009 2011 2012


ROUTE 128 NORTHROUTE 128 WESTROUTE 128 SOUTH

Absorption & Vacancy //Route 128

*Includes projects currently under construction

CURRENT DATA

Vacancy 16.6%

Quarterly Absorption 66,000 sf


Decade Inventory (RSF) Dir Avail%

Pre 60s 36,900,000 13.8%

60s 11,900,000 14.8%

70s 24,500,000 16.3%

80s 65,500,000 24.1%

90s 17,900,000 15.0%

00s 20,700,000 12.8%

10s* 5,000,000 4.8%

Route 128 officeSTATus

6

The first 27 Boston Marathons

were 25 miles and started near

the town center of Ashland; as

the distance of the marathon

was universalized at 26 miles,

285 yards, the starting line

was pushed back to its present

location in Hopkinton.

0%

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30%

2003 2005 2007 2009 2011 2013

(1,000)

(800)

(600)

(400)

(200)

0

200

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600


Vacancy%

$16

$17

$18

$19

$20

$21

$22

$23

$24

$25

2003 2005 2007 2009 2011 2013


I-495 NORTHI-495 WESTI-495 SOUTH

Class A Asking Lease Rates //Interstate 495

Buildings experiencing occupancy increases of at least 2,000 sf148

104

1,176

Buildings experiencing occupancy decreases of at least 2,000 sf

Buildings experiencing less than a 2,000 sf shift in occupancy levels

Most Buildings See Rising Occupancy //Number of buildings experiencing growth, contraction and stability

0%

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30%

2003 2005 2007 2009 2011 2013

(1,000)

(800)

(600)

(400)

(200)

0

200

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Vacancy%

$16

$17

$18

$19

$20

$21

$22

$23

$24

$25

2003 2005 2007 2009 2011 2013


I-495 NORTHI-495 WESTI-495 SOUTH

Absorption, Completions, Vacancy //Interstate 495

495 FACT

Slight negative absorption of 48,000 sf left vacancy stable at 20.0 percent and

average Class A asking lease rates flat at $19.72 per sf.

Marlborough average asking lease rates have risen above $18 per sf for the first

time since 2009; the town is set to undergo a transformation with a flurry of new

tenants and retail amenities.

Andover and Chelmsford have combined for 241,000 sf of negative absorption

last twelve months as the two well regarded areas have been impacted with

consolidation events.

Framingham/Natick vacancy has fallen from 11.8 percent to 9.9 percent on three

consecutive quarters of positive absorption driven by Class A properties.

Cambridge Isotope Laboratories moved into 39,000 sf in Tewksbury as AECOM took

occupancy of 35,000 sf in Westford, Advanced Cell Technology moved into 30,000 sf

in Marlborough and Virgin Healthmiles took occupancy of 20,000 sf in Framingham;

Enterasys vacated 152,000 sf in Andover in a relocation to New Hampshire.

Fifty-one percent of 495 properties were developed in the 1980s; that inventory is

22.4 percent vacant.

Novaya Ventures acquired 1&2 Executive Drive in Chelmsford ($23.5 million,

225,000 sf, $104 per sf) as Maric bought the New England Business Center in Andover

($20.9 million, 242,000 sf, $86 per sf).

Highlights

CURRENT DATA

Vacancy 20.0%


Last Twelve Months Absorption -65,000 sf

CURRENT DATA

I95-North $18.40

I95-West $20.96

I95-South $20.12

Interstate 495 officeSTATus

7

First an industrial powerhouse, then a giant discount parking lot for Financial District workers, a decades-long vision for the Seaport is becoming rapidly realized. Since

2008, more than 100 tenants have moved or announced moves into more than three and a half million sf of Seaport District space, establishing a new Boston office,

relocating from another location or starting up. Below are some numbers behind this trend…

With 42 annual publications, Richards Barry Joyce

& Partners produces more research than any other

commercial real estate advisory firm in Greater Boston.

For more information, contact us at [email protected].

Brendan CarrollSenior Vice President of Research | [email protected]

Seaport District – the vision becomes reality.

sf thousands

Residential Units # of Restaurants Hotel Rooms1996 2016 1996 2016 1996 2016

*includes under construction projects

0 0 5

32 1,797 1,665

Biotech1.1 million sf

Financial707,000 sf

Legal648,000 sf

Tech646,000 sf

Creative202,000 sf

Other325,000 sf

World Trade Center476,000 sf

Marine Industrial Park156,000 sf

Financial District1.4 million sf

Other Boston328,000 sf

Suburbs244,000 sf

Startup 122,000 sf

Other 108,000 sf

Cambridge/Watertown 1.5 million sf

Fort Point3.0 million sf

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016

…are moving in… sf committed by year of move-in

sf thousands



0 0 5

32 1,797 1,665


Financial707,000 sf

Legal648,000 sf

Tech646,000 sf

Creative202,000 sf

Other325,000 sf





Suburbs244,000 sf

Startup 122,000 sf

Other 108,000 sf



0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016

… from a diverse set of industries… industries of new seaport occupants

sf thousands



0 0 5

32 1,797 1,665


Financial707,000 sf

Legal648,000 sf

Tech646,000 sf

Creative202,000 sf

Other325,000 sf





Suburbs244,000 sf

Startup 122,000 sf

Other 108,000 sf



0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016

…in three distinct sub-areas… micromarkets of seaport with amount taken

sf thousands



0 0 5

32 1,797 1,665


Financial707,000 sf

Legal648,000 sf

Tech646,000 sf

Creative202,000 sf

Other325,000 sf





Suburbs244,000 sf

Startup 122,000 sf

Other 108,000 sf



0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016

…and numerous locations… previous locations of new seaport occupants

sf thousands



0 0 5

32 1,797 1,665


Financial707,000 sf

Legal648,000 sf

Tech646,000 sf

Creative202,000 sf

Other325,000 sf





Suburbs244,000 sf

Startup 122,000 sf

Other 108,000 sf



0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016

…as live/work/play is achieved //growth in amenities 1996-2016*

More than 100 new tenants… largest seaport commitments since 2008

TENANT SEAPORT LOCATION SIZE (SF)

Vertex Pharma. Fan Pier 1,100,000

State Street 1 Channel Center 500,000

Goodwin Procter Fan Pier 360,000

Fish & Richardson Fan Pier 124,000

JPMorgan Chase 451 D Street 120,000

Cengage Learning 20 Channel Center Street 110,000

LogMeIn 312-320 Summer Street 102,000

enerNOC Fan Pier 82,000

Boston Herald 451 D Street 51,000

Zipcar 35 Thomson Street 46,000

Market Interesting officeSTATus

ABSORPTION/OCC GROWTH CONSTRUCTION $CL A ASKING RENT

AREA RSF Vac% Q1’13 LTM* Growth** Comp LTM* Pipeline Class A 4Qtr Ch***

TOTAL MARKET 179,856 14.5% (105) 1,550 1.0% 160 2,638 $39.32 1.5%

BOSTON SUBMARKETS 70,039 11.1% (155) 751 1.3% 0 1,630 $50.29 2.2%

Financial District 35,463 12.9% 28 777 2.6% 0 0 $48.29 -0.4%

Back Bay 13,272 7.7% (207) (256) -2.1% 0 580 $59.26 7.4%

Longwood/Inner South 5,221 6.3% 0 33 0.7% 0 0 $27.64 0.4%

Seaport District 7,183 15.2% 8 204 4.4% 0 1,050 $51.07 13.8%

Charlestown 2,873 6.0% (11) (48) -1.7% 0 0 $26.82 -10.6%

Midtown 2,341 11.1% 0 25 1.2% 0 0 NA NA

North Station 2,189 7.3% (1) (38) -1.9% 0 0 $28.00 0.0%

South Station 1,498 10.1% 28 54 4.3% 0 0 NA NA

CAMBRIDGE 10,582 7.9% (9) (23) -0.2% 0 495 $50.20 8.8%

East Cambridge 6,851 8.5% (33) (114) -1.8% 0 495 $54.58 10.5%

Mid Cambridge 2,060 0.5% (7) 11 0.5% 0 0 $49.40 2.9%

West Cambridge 1,671 14.3% 31 81 5.8% 0 0 $35.45 6.4%

SUBURBAN SUBMARKETS 99,235 17.7% 59 821 1.0% 160 513 $24.79 2.2%

Inner North 4,060 15.4% 41 167 5.1% 0 0 $26.98 0.5%

ROUTE 128 & I-495 95,175 17.8% 18 654 0.9% 160 513 $24.73 2.4%

ROUTE 128 61,560 16.6% 66 719 1.4% 160 513 $26.94 2.5%

Route 128 North 25,914 17.1% (244) 335 1.6% 0 513 $25.91 6.3%

Route 128 West 22,517 14.2% 184 301 1.6% 0 0 $30.99 0.3%

Route 128 South 13,129 19.7% 126 83 0.8% 160 0 $21.04 -3.3%

I-495 33,615 20.0% (48) (65) -0.2% 0 0 $19.72 1.9%

I-495 North 15,092 23.6% (90) (266) -2.3% 0 0 $18.40 2.1%

I-495 West 15,909 17.3% 39 (81) -0.6% 0 0 $20.96 -0.8%

I-495 South 2,614 16.0% 4 282 14.2% 0 0 $20.12 0.0%

Lovejoy Warf | Boston

187,000 SF

Richards Barry Joyce & Partners acted as tenant

representative for Converse Inc. in connection with

a lease agreement.

ALL AMOUNTS, EXCEPT PERCENTAGES AND $ FIGURES IN THOUSANDS

* LTM = Last twelve months // ** LTM absorption as a percentage of occupancy levels twelve months ago // *** Twelve months change in asking lease rate

1601 Trapelo Road | Waltham

251,326 SF

Richards Barry Joyce & Partners acted as tenant

representative for Constant Contact, Inc. in

connection with a lease agreement.

320 Bent Street | Cambridge

104,678 SF

Richards Barry Joyce & Partners acted as

landlord representative for BioMed Realty Trust in

connection with a lease agreement.

Copyright © 2013

officeSTATus Spring // 2013

office status spring // 2013 · 2003 2005 2007 2009 2011 2013 (1.0) (0.8) (0.6) (0.4) (0.2) 0.0 0.2...

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