Q4

by R.W. Holmes Realty Greater Boston Market Report Q4 REPORT 321 Commonwealth Rd, Wayland, MA 01778 Phone: 508-655-5626 Web : www.rwholmes.com

WHAT TO EXPECT IN 2019 2019 FORECAST Q4 2018

Q4 2018 2019 OUTLOOK The economic fundamentals remain strong going into 2019. Despite some uncertainty, we expect a remarkable 10th year of prosperity. Boston and its suburbs continue to be one of the most dynamic real estate markets, confirming its place as one of the top tier markets in the country. For the suburbs, industrial space will continue to be the hottest product, regardless of the submarket. We expect the Boston and suburban office market to maintain strong fundamentals, although the I-495 markets will continue to be challenged in terms of leasing activity and rent growth. With just over 100 million square feet, the suburban office market exhibits mixed results between various sub-markets. Central 128 currently has the most momentum with Waltham taking the majority of the accolades in 2018. As the rents continue to rise in downtown Boston, Central 128 and the inner suburbs continue to benefit from lower rents, great amenities, and access to public transportation. Not surprisingly, the suburban office markets of concern are along I-495 with the bright spot being Marlborough for the 3rd year in a row. What the I-495 area lacks in terms of office absorption is certainly overshadowed by the tremendous demand by industrial users. As a result, quality flex buildings are now trading at over $100/SF along I-495. Noteworthy Trends: • Office tenant demand in Boston far exceeds the suburbs • $88/SF NNN lab rents in Cambridge is creating a vibrant life science market along Rt 128 • $21/SF office rent along I-495 doubles to low $40’s in central Rt 128, then close to $80/SF in Boston • Location of the office dictated by where the employees live rather than executives • As returns are squeezed in Boston, more investors are chasing suburban acquisitions Garry Holmes President, R.W. Holmes Realty

GREATER BOSTON SUBMARKETS SUBMARKET DATA Q4 2018

LEASE 55 OLD BEDFORD ROAD LINCOLN THD 22,000 SF LEASE POST - 200 SMITH ST WALTHAM ElevateBio & Boston Dynamics 107,000 SF & 175,000 SF $33.00/SF AVERAGE RATE (GROSS) CLASS A & B SPACE 10.8% VACANCY RATE 33,204,472 TOTAL SQUARE FEET 128 CENTRAL(office) Q4 2018 502,000 SQUARE FEET UNDER CONSTRUCTION LEASE 10 MAGUIRE ROAD LEXINGTON Reveneer 31,000 SF MARKET RECAP • 2018 saw a significant increase in biotech and robotics companies acquiring space in Central 128. This is primarily caused by the 1% vacancy and $88/SF rental rates in Kendall Square, which are forcing companies to look to the 128 belt for space. • Development along Rt 128 is not slowing. There are several developers currently planning redevelopments to accommodate increased demand in lab space. This comes after seeing projects like POST in Waltham reach 85% occupancy to a mix of biotech and robotics companies. One example is Boston Properties at 200 West St in Waltham. NOTEWORTHY NEWS • Lab buildings along Rt 128 continue to trade at record levels. Following the Q3 sales of 828 Winter St. in Waltham and 490 Arsenal St. (The Linx) in Watertown, whose average sale price per square foot averaged around $775/SF, 65 Grove St in Watertown, which has lab infrastructure/capability sold for over $545/SF • Wellesley Office Park owners, John Hancock, are contemplating redeveloping the office park to include multifamily housing and a hotel, leaving only three office buildings in the park after the redevelopment. AREAS OF CONCERN • Companies are starting to become more cautious as expectations of a potential market downturn heighten. This has caused tenants to consider shorter lease terms or avoid moving unless alternative options in the market provide lower rents or smaller annual rent escalations. SUBMARKET NEWS RECAP OF MARKET HEALTH NOTEWORTHY TRANSACTIONS

NOTEWORTHY TRANSACTIONS SALE 25 BURLINGTON MALL ROAD BURLINGTON $74,000,000 ($257/SF) LEASE 75 NETWORK DRIVE BURLINGTON Avid Technology, Inc. 130,000 SF (renewal) LEASE 14 OAK PARK BEDFORD Progress Software 165,000 SF (renewal) $22.50/SF AVERAGE RATE (GROSS) CLASS A & B SPACE 13.9% VACANCY RATE 47,590,169 TOTAL SQUARE FEET 128 NORTH/3 NORTH (office) Q4 2018 205,000 SQUARE FEET UNDER CONSTRUCTION SUBMARKET NEWS RECAP OF MARKET HEALTH MARKET RECAP • With rents climbing to peak levels in Burlington and vacancy on the decline, many large tenants will need to look further up Route 3 to find a contiguous block of space over 50,000 SF. • Capital improvements made by office landlords over the past 3 years are paying off. Absoption is up over 50% and leasing activity was strong in Q4. Burlington alone saw over 150,000 SF in new deals in Q4. NOTEWORTHY NEWS • Two 100k+ SF tenants renewed their lease: Avid Technology and Progress Software. • Large blocks of office space were absorbed in Q4, particularly in Class A properties in Burlington. The activity has Class A office rents asking over $40/SF in Burlington. • Class B value options have also enjoyed positive absorption. Forest Ridge Business Park in Billerica is over 93% leased and 2, 4 and 6 Omni Way in Chelmsford saw over 130,000 SF in new deals in Q3 and Q4. AREAS OF CONCERN • Where do we go from here? With rents now peaking and vacancy continuing to decline, many tenants have decided to renew, or in the case of Zoll Medical in Chelmsford, purchase the building they were previously leasing (267,000 SF). For tenants looking for contiguous blocks over 30,000 SF, options are limited towards 128 (only 3 options exist today in Burlington). This could push many suitors to hold off or consider relocating further north.

$23.75 AVERAGE RATE (GROSS) CLASS A & B SPACE 9.1% VACANCY RATE 7,978,300 TOTAL SQUARE FEET NATICK/FRAMINGHAM (office) Q4 2018 169,000 SQUARE FEET UNDER CONSTRUCTION SALE 30 SPEEN ST FRAMINGHAM $3,283,500 ($81.00/SF) LEASE 492 OLD CONNECTICUT PATH FRAMINGHAM LYTX 12,000 SF LEASE 550 COCHITUATE RD FRAMINGHAM FEDEX 7,000 SF SUBMARKET NEWS RECAP OF MARKET HEALTH MARKET RECAP • The Natick/Framingham market remains stable with a vacancy rate of 9.1%. However, we have seen activity and absorption decline. Companies relocating from Rt 128 traditionally added to the vibrancy, but now a lot of companies feel they need to be on or inside Rt 128 to attract young talent. • Class A rents are topping out at $32.00/SF. NOTEWORTHY NEWS • Five new massive multifamily developments are underway in Framingham. • Framingham created a new corporate mixed-use district near exit 12 of the Mass Pike to spur economic development. • Ownership decided to take Point West Place, 111 Speen St. Framingham, off the market. AREAS OF CONCERN • Despite Framingham based Sanofi/Genzyme inking a massive 900,000 SF lease in Cambridge we are cautiously optimistic they will not reduce their footprint in Metrowest because of their large investment in the building they occupy. NOTEWORTHY TRANSACTIONS

LEASE 1 RESEARCH DRIVE WESTBOROUGH Noresco 19,672 SF SALE 144 TURNPIKE RD SOUTHBOROUGH $14,385,000 ($144/SF) LEASE APEX CENTER MARLBOROUGH Synopsis 30,000 SF 495 WEST (office) Q4 2018 $19.25/SF AVERAGE RATE (GROSS) CLASS A & B SPACE 21.8% VACANCY RATE 9,102,672 TOTAL SQUARE FEET 0 SQUARE FEET UNDER CONSTRUCTION SUBMARKET NEWS RECAP OF MARKET HEALTH NOTEWORTHY TRANSACTIONS MARKET RECAP • Tenants continue to gravitate towards buildings with amenities. NOTEWORTHY NEWS • IPG is remaining bullish on Marlborough. They just closed on a land parcel at 685 Forest Street and they are also targeting another sizeable office building to purchase. • There has been some significant activity in Marlborough with larger tenants in the market. Synopsys has taken 30,000 SF at Apex Center, Repligen took 40,000 at 111 Locke Drive, and Candela, and ADP are nearing large deals in Marlborough. • Just over a year into new ownership, Knowledge Park has secured 26 tenants due to substantial upgrades in all three buildings. • Olympus is placing 800 West Park Dr. in Westborough under agreement for the construction of a 150,000 SF building. AREAS OF CONCERN • The amount of availability in Southborough continues to climb. Currently at 27.1 % vacancy, that number will jump to 35% once 71,000 SF comes back to the market at 118 Turnpike Road in Southborough. • Sandisk giving back their space as of September 2019 will create a large parcel of space in the office market.

$8.15/SF NNN AVERAGE RATE 7.9% VACANCY RATE 40,087,000 TOTAL SQUARE FEET RECAP OF MARKET HEALTH 495 SOUTH (industrial) Q4 2018 678,000 SQUARE FEET UNDER CONSTRUCTION NOTEWORTHY TRANSACTIONS SALE 190 MECHANIC STREET BELLINGHAM $25,100,000 ($119/SF) SALE 38 FORGE PARKWAY FRANKLIN $9,200,000 ($116/SF) SALE 50 D’ANGELO DRIVE MARLBOROUGH $7,225,000 ($90/SF) SUBMARKET NEWS MARKET RECAP • The Industrial Market ends 2018 much the way it began with record breaking transaction numbers on both the sales and leasing fronts. Activity continued strong throughout the 4th quarter with several noteworthy sales completed before year end. Expectations remain high for 2019 with some new product coming to market but with portions already committed. Limited supply for most smaller requirements will make it challenging to place both tenants and buyers for the year ahead. NOTEWORTHY NEWS • The first ten year lease of 50,000 SF has been signed at a newly constructed 32’ clear 353 Maple Street, Bellingham. 377,500 SF in two buildings remain for immediate occupancy. AREAS OF CONCERN • Buyer and tenant demant in the 10,000-40,000 SF range continues to far outpace supply and will create greater challenges for companies seeking industrial/flex space along Rt 495 in these size ranges.

SALE 9-11 MEAR RD HOLBROOK $5,200,000 LEASE 57 LITTLEFIELD STREET AVON Empire Today 60,000 SF LEASE 5 DAN ROAD CANTON EquipNet 101,037 SF RT 24 (Industrial) Q4 2018 $7.10/SF AVERAGE RATE (GROSS) 4.4% VACANCY RATE 37,952,724 TOTAL SQUARE FEET 539,000 SQUARE FEET UNDER CONSTRUCTION SUBMARKET NEWS RECAP OF MARKET HEALTH NOTEWORTHY TRANSACTIONS MARKET RECAP • The vacancy rate for the greater Route 24 Industrial market remains higher than most other Massachusetts markets due to the abundance of several large blocks of space. A recent survey showed 12 different spaces ranging from 100,000 SF to 500,000 SF. Skewing the vacancy rate is 500,000 SF space in Braintree and another 515,000 space in West Bridgewater. What may be more concerning is that in past recessions, the abundance of larger spaces became prevalent and remained mostly vacant until the recession was over. • Meanwhile, vacancy rates for smaller spaces remain low with fewer choices for units under 15,000 SF. Leasing rates for these smaller spaces are as high as they have ever been and the continued market tightness for these spaces continue to push rates higher. NOTEWORTHY NEWS • R.W. Holmes completed the sale of 65,000 SF on 10 acres in West Bridgewater to ICS Corporation relocating from Randolph. ICS supplies plants and associated products to the Home Depot stores throughout the Northeast and employees over 300 workers.

IN 2018, WATERTOWN was the star of several of the most notable real estate transactions. This will be one of the cities to watch in 2019 as the interest in the Inner Suburbs continues to rise. Q4 2018 Vacancy Rate Cut in Half: From 2017 to 2018, vacancy in Watertown went from a high of 16.5% in 2017 down to 8.1% in Q4 of 2018. This can be attributed to the increased interest in the Inner Suburbs for rent relief and increased availability compared to downtown Boston and Cambridge markets. Rent on the Rise As a result of the low supply in Watertown, rent prices have increased by over $10/SF throughout the market from 2017 to 2018. New lab buildings in Watertown are able to achieve rents in the high $50’s NNN. Biotech Cluster As a result of Cambridge’s 2% vacancy rate, biotech companies have been forced to look outside of Cambridge for both availability and rent relief. In 2018, we saw numerous biotech deals like C4 Therapeutics (45k SF) and Kala Pharmaceuticals (65k SF) come to Watertown. As a result, not only are companies looking to Watertown for lab space, but investors have turned their attention to the area for new lab construction. New Construction In 2018 we had lab buildings such as 65 Grove St (120k sf) be delivered as well as the announcement of the redevelopment of the Arsenal Mall to include over 400k SF of multifamily and 100k SF of office/lab space. Massive Sales One of the largest suburban sales in history occurred at the LINX in Watertown in 2018. The LINX at 490 Arsenal St, a fully leased lab building, sold for $157M ($851/SF). The average sale price in Watertown for 2018 was $392/ SF. 2018: THE RISE OF WATERTOWN MARKET HIGHLIGHT

Garry Holmes President Dean Blackey Managing Director John Eysenbach Executive Vice President Craig Johnston Senior Vice President Robert Strelke Vice President Jim Bartholomew Assistant Vice President Mike Ogasapian Assitant Vice President Elizabeth Holmes Director of Corporate Services Sean O’Riordan Marketing Manager Paul McKeon Director of Finance Arthur Amadei Senior Vice President NOTABLE R.W. HOLMES MILESTONES Mike Ogasapian was awarded the 2018 Robert W. Holmes SIOR Scholarship. Over his four years at R.W. Holmes, Mike has assisted in over 250,000 square feet in leasing of office and industrial space on behalf of landlords and has completed several challenging tenant representation assignments. OGASAPIAN WINS SCHOLARSHIP R.W. Holmes was recognized by the Massachusetts Family Business Awards in partnership with Northeastern University’s Center for Family Business as the Family Business of the Year. The award recognizes family businesses on the basis of their longevity, business success, and contributions to their community. FAMILY BUSINESS AWARD BBJ’S THE LIST R.W. Holmes received the ranking of seventh largest commercial real estate firm in MA behind six large national firms, making R.W. Holmes the highest selling independent commercial real estate firm in MA. 25 YEARS Craig Johnston reached the 25 year milestone with R.W. Holmes. Over the course of his commercial real estate career, Craig has completed nearly 400 leases and sales transactions. COMPANY GROWTH: R.W. Holmes has hired Sean O’Riordan as Marketing Manager. Sean brings years of marketing experience with a focus on real estate. CORPORATE LEADERSHIP TEAM