RWH - Q3 2020 Greater Boston CRE Market Report

2020 321 Commonwealth Rd, Wayland, MA 01778
Phone: 508-655-5626
Web : www.rwholmes.com

Q3 REPORT

Greater Boston Market Report

by R.W. Holmes Realty

Q3 2020

LIFE SCIENCE DEMAND

IN GREATER BOSTON SUBURBS

CONTINUTED DEMAND FOR LIFE SCIENCE
SPACE IN GREATER BOSTON

It is no surprise that the Life Science industry continues to be the darling of Massachusetts real
estate owners. The demand continues to grow, seeping out of Kendall Square first into the Inner
Suburbs and Seaport. Now, demand is becoming more regular and newsworthy throughout the
Greater Boston suburbs. Here is a snapshot of what we are seeing in the market.

WHO

The range of life science companies looking to the suburbs for lab space varies widely. We are
seeing everything from startups out of university labs to sophisticated biotech companies looking
for expansion space after a recent funding raise, breakthrough, or acquisition. The suburbs are
seeing an increase in demand for GMP manufacturing space – shown by companies like Thermo
Fisher taking 290,000 SF in Plainville. Cell and Gene Therapy companies continue to expand as
the science and technology continues to evolve and become ready for commercialization.

WHERE

Clusters are forming throughout the markets. For companies looking outside of Kendall Square,
the hottest clusters are in Seaport and Watertown. However, other clusters are forming or
strengthening throughout the suburbs as well. Waltham and Lexington remain extremely
strong, pulling large local and downtown companies such as Translate Bio (140,000 SF) and
Affinia (70,000 SF) to new space in Waltham and Integral Health (30,000 SF) into Lexington to
bring the spec development at 75 Hayden Ave to 100% occupancy pre-completion.
Natick/Framingham are starting to see more life science traction as ABI Labs works towards
filling their 60,000 SF second incubator and CRISPR takes 50,000 SF for manufacturing space.
128 North is seeing strong clusters emerge in Burlington/Woburn as well as Beverly. Cummings
Properties is developing a new 205,000 SF life science facility in Beverly to accommodate
demand they have seen within their existing lab portfolio. The Boros are seeing activity in
Marlborough and Hopkinton – Lykan Bio is taking 64,000 SF in Hopkinton for their manufacturing
facility. Worcester continues to grow with Galaxy Life Sciences new $50M development project
and WuXi Biologics 107,000 SF planned facility.

WHAT TENANTS WANT

Depending on the type of company and life stage, needs for each life science company vary.
Overall, companies are looking to the suburbs for one of three reasons: affordability, more
square footage, or easier commute. From there, the decision on which building to pick comes
down to readiness of the space, local cluster/ecosystem, and ownership. Having space with
lab infrastructure already in place is critical for many life science companies. With their growth
trajectories, some cannot wait 3-12 months for a space to be complete or cannot afford the
costly build out. For many life science startups, they will need to rely heavily on ownership and
their team to understand what they need for lab specs, since many are coming from pre-built
university labs or incubators. Owners that are knowledgeable or have life science experience are
seeing an influx in new tenants.

ACCOMMODATING FUTURE DEMAND

Throughout Greater Boston, there is over 40 million square feet of new lab space proposed or
under construction. Some of these developments are looking to fill the growing need for GMP
manufacturing space – such as King Street in Devens. Others are looking to accommodate the
venture-backed companies coming out of Kendall Square with state-of-the-art lab space. One
tenant base we believe is not being specifically targeted in these new construction projects is the
“Class B” lab user. These are non- venture backed companies who need relatively simple build-
outs but are more budget conscious. Currently these groups are taking less expensive flex space
and performing the build-out on their own dollar. Owners who can provide move-in ready lab
space through conversions of Class B office product or flex space will see strong activity.

SQ3UB2020 MARKET DATA

GREATER BOSTON SUBMARKETS

Q3 2020

128 CENTRAL (office)

SUBMARKET NEWS

MARKET RECAP
• Lab conversions are paying off – Boston Properties is converting 200 and 195 West Street in Waltham to

accommodate both lab and office users. They have deals underway with life science groups who will take all of 195
West Street and Translate Bio taking 140,000 SF at 200 West Street.
• Surprisingly asking rents have not decreased noticeably. Regardless, tenants in the market are shopping for rent
concessions and other incentives.
• The sales market remains extremely strong along 128. There is still interest from both owner-occupants and investors
to find quality industrial/flex buildings and income-producing office assets. We have not seen a decline in sale prices.

WHAT WE WILL BE WATCHING
• Several large tenants still remain active in the market. Expect to hear of several large office deals, not just life science

companies, closing in the next few months. Particularly the potential for an 100,000 + SF Waltham Robotics user to
take space at PTC’s old Needham building.
• The sublease market has continued to gradually grow since March. However, several larger blocks came to the
market this quarter including Vistaprint’s sublease of 131,000 SF and Rockport’s sublease of 70,000 SF.
• Construction is underway at two major redevelopments. Lincoln Properties’ 300 Third Ave broke ground on 140,000
SF spec lab to be delivered in 2021. John Hancock began demolition of 40 William Street as they begin their
redevelopment at Wellesley Office Park to include multi-family and a hotel.

RECAP OF MARKET HEALTH

28,300,000 13.5% $39.50/SF 862,000
TOTAL SQUARE FEET VACANCY RATE
AVERAGE RATE (GROSS) SQUARE FEET UNDER
CLASS A & B SPACE CONSTRUCTION

Q3 Transaction Breakdown Q3 Transactions by Size

NOTEWORTHY TRANSACTIONS

Lease Sale Sale - Redevelopment
43 Foundry Ave, Waltham 15 Riverdale Ave, Newton
Reservoir Woods: Sylvan Rd, Waltham $13,260,000 ($250.19/SF)
41,000 SF $330,000,000 ($345.91/SF) Criterion Development Partners
Affinia Therapeutics
Alexandria Real Estate Equities, Inc.

Q3 2020

128 NORTH/ RT. 3 NORTH (office)

SUBMARKET NEWS

MARKET RECAP

• Despite the negative trend in absorption, some notable office deals happened in Q3. CREST Collaborative
has agreed to take 130,000 SF at 20 Shattuck in Andover and Donahue Family Trust bought 10 State Street in
Woburn for $150/SF.

• Rental rates remain flat and vacancy has not moved much yet in the face of COVID. Some major tenants in the
market have shelved traditional office requirements, but the same cannot be said for lab users.

WHAT WE WILL BE WATCHING

• Many speculative and BTS life sciences options are in the pipeline to come on line over the next 2-3 years.
Presently, many early stage life science companies that are already located in the market in incubator space
are beginning to think about their next move. Will that speculative lab development pipeline come online fast
enough to meet demand? If not, expect conversion to bleed into the industrial market in the interim.

RECAP OF MARKET HEALTH

47,620,000 15.2% $26.00/SF 189,000
TOTAL SQUARE FEET VACANCY RATE
AVERAGE RATE (GROSS) SQUARE FEET UNDER
CLASS A & B SPACE CONSTRUCTION

Q3 Transaction Breakdown Q3 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Built to Suit/Sale Lease
10 State St, Woburn 20 Shattuck Rd, Andover 600 Technology Park, Billerica
$7,400,000 ($150/SF)
Donahue Family Trust 130,000 SF 47,000 SF
CREST Collaborative Confidential Tenant

Q3 2020

NATICK/FRAMINGHAM (office)

SUBMARKET NEWS

MARKET RECAP

• Q1 and Q2 of this year were trending like the Natick/Framingham Office market might stave off any significant repercussions of
COVID-19. Q3, however, paints a more sobering picture. In the past 90 days, there have been a number of prominent companies
who decided to shed large blocks of office space. At 100 Pennsylvania Avenue, for example, Disrupter Beam’s recent announcement
of bankruptcy will return 31,592 SF. At 959 Concord Street, EPM plans to relinquish 20,145 SF. At 111 Speen Street, Ameresco can
give up 20,003 SF. At 492 Old Connecticut Path, Virgin Pulse is looking to sublease 19,964 SF and at 24 Superior Drive in Natick,
Centage will be consolidating and giving back 17,012 SF. All told, the Natick and Framingham office market will be seeing just over
200,000 SF of space added to the market.

• Bright spots in Q3 include the sale of 405 Cochituate Road in Framingham to R.J. Kelly for $12.4 million.

WHAT WE WILL BE WATCHING

• Demonstrating that real estate related to Life Sciences continue to buck the trend, King Street Properties intends to place both 1-5
Mountain Road (fully leased to Sanofi) and 33 New York Avenue (leased to Replimune and CRISPR Therapeutics) on the market. Both
properties total 267,000 SF.

• Clarion Partners has decided to put 100 Staples Drive, Framingham on the market. Despite the influx of space available, this 160,925
SF building should attract a number of bidders given the scarcity of freestanding buildings of this size that can be delivered vacant to
a large user.

• With availability increasing, Landlords will need to pivot quickly. With most amenities like café’s, conference centers, and fitness
rooms currently mothballed, Landlords will likely resort to steeper rent concessions to compete in this new market.

RECAP OF MARKET HEALTH

8,460,000 12.7% $26.00/SF 0
TOTAL SQUARE FEET VACANCY RATE
AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

Q3 Transaction Breakdown Q3 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Lease For Sale
30 Speen St, Framingham 100 Staples Dr, Framingham
405 Cochituate Rd, Framingham
5,700 SF 157,133 SF
$12,400,000 ($291.44/SF) ARCO National Construction
R.J. Kelly Company

Q3 2020

495 WEST (office)

SUBMARKET NEWS

MARKET RECAP

• Office deals have slowed as large companies wait to see what impact post-COVID life has on the workplace.
• Users under 5,000 SF are more inclined to consider relocation options.
• Companies with lease expirations are finding short-term renewals as a temporary holder.
• With interest rates still low, sales of smaller properties continue to be strong.

WHAT WE WILL BE WATCHING

• We are starting to see additional sublet space become available within the Boroughs.
• Despite all the negativity surrounding the future of office space, there are several bullish investors looking for

opportunities such as Ferris Development acquiring the 80,000 SF vacant office building at 120 Turnpike Road in
Southborough for $3,500,000 ($42.00/SF). Will these bets pay off for aggressive investors?

RECAP OF MARKET HEALTH

11,900,000 19.9% $20.00/SF 150,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE (GROSS) SQUARE FEET UNDER

CLASS A & B SPACE CONSTRUCTION

Q3 Transaction Breakdown Q3 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Lease Lease
44 Bearfoot Rd, Northborough 120 Turnpike Rd, Southborough 1 Research Dr, Westborough

$5,650,000 ($125/SF) 18,695 SF 7,391 SF
Ciminelli Real Estate Corporation Hilb Group Jensen Hughes

Q3 2020

128 NORTH/ RT. 3 NORTH (industrial)

SUBMARKET NEWS

MARKET RECAP

• Trades of vacant and leased high bay buildings continue to occur at a record clip. 180 New Boston Street in Woburn
($157/SF, vacant), 45 Fondi in Haverhill ($121/SF, leased), and 220 Mill in Chelmsford ($137/SF, User: Thermo
Fisher) are all prime examples of investor demand. The highlight of the quarter was the record high of $188/SF for
Expeditors building at 3 Technology in Peabody.

WHAT WE WILL BE WATCHING

• Life Sciences companies are stretching their demand and reshaping the landscape of industrial real estate. Thermo
Fisher’s commitment to backfill 85,000 SF at 220 Mill and Azzur Clean Rooms’ commitment to 50,000 SF at 60
Blanchard Road in Burlington are signs of that trend.

• More large commitments from Amazon are causing an up-tick in absorption. In the wake of that, other traditional
warehouse users are faced with dwindling supply and premium rents on vacant space. Will this cause a further
push to the 495 belt for users running out of room?

RECAP OF MARKET HEALTH

95,016,300 5.4% $11.50/SF 224,400
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE (GROSS)
SQUARE FEET UNDER
CLASS A & B SPACE CONSTRUCTION

Q3 Transaction Breakdown Q3 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Sale Lease
3 Technology Dr, Peabody 25 Computer Dr, Haverhill 613 Main St, Wilmington

$30,100,000 ($188/SF) $14,000,000 ($100/SF) 380,000 SF
Wheelock Capital Eastern Real Estate Lowes and Homans Distributors

Q3 2020

495 SOUTH (industrial)

SUSBUMBMARAKREKTENTENWESWS

MARKET RECAP
• The third quarter activity continues in the industrial/flex 495 South market with leases signed on spaces from 25,000 -

200,000 SF. Existing product vacancy has dropped for the third time in 2020 with no signs of change coming any time soon.
• E-commerce and Life Science activity persists with strong demand for single and two-story flex product types.
• Bullish activity still persists with plans still underway for the October ground breaking of speculative 800,000 SF

distribution complex in Hopping Brook Park with only one or two tenants in mind.

WHAT WE WILL BE WATCHING

• The greatest challenge for Q4 2020 and 2021 will be to establish a realistic timeline for future tenant representative
requirements. With declining vacancy, limited move-in ready space opportunities, target occupancy dates are becoming
more and more difficult.

• The best advice is to plan ahead and make commitments as early as possible.

RECAP OF MARKET HEALTH

46,700,000 4.9% $10.25/SF NNN 1,700,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE SQUARE FEET UNDER

CONSTRUCTION

Q3 Transaction Breakdown Q3 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Lease Lease
800 Boston Tpke, Shrewsburry 176 S Washington St, Norton 30 Commerce Blvd, Middleborough

$6,250,000 ($78.13/SF) 209,643 SF 132,298 SF
McGovern Auto Group US Cabinet Depot Amazon

Q3 2020

RT 24 (industrial)

SUUBBMMAARRKKEETTNNEWEWS S

MARKET RECAP
• Industrial spaces under 25,000 SF continue to be in high demand and despite the pandemic, transactions continue

to be at historically high lease rates.
• We anticipate high demand for industrial to continue, with very little availability for spaces under 25,000 SF. There

is an increase of product in the 30,000 – 80,000 SF range with activity becoming slower.

WHAT WE WILL BE WATCHING

• There is an abnormal abundance of industrial properties to choose from in the 100,000 – 500,000 SF range with
limited activity. Some of these spaces continue to be available for 12 - 24 months.

• In Norton, at Bluestar Business Park, there are two spec buildings close to completion by Condyne. The first is a
220,000 SF building 50% committed and the second is a 125,000 SF industrial building.

• A new 350,000 SF spec building has just been completed at 1025 Elm Street in Bridgewater.

RECAP OF MARKET HEALTH

40,225,760 4.9% $9.25/SF NNN 615,000
TOTAL SQUARE FEET VACANCY RATE AVERAGE RATE SQUARE FEET UNDER

CONSTRUCTION

Q3 Transaction Breakdown Q3 Transactions by Size

NOTEWORTHY TRANSACTIONS

Sale Sale Sale
44 Bedford St, Middleborough 456 Bedford St, Attleboro 305 Constitution Dr, Taunton
$15,450,000 ($77.29/SF)
$4,600,000 ($114.95/SF) $3,000,000 ($107.14/SF)
West Light Development Inc. Rhino Capital LLC American Anchor Inc.

Q3 M2020 ARKET TRENDS

FUTURE OF OFFICE SPACE

GETTING EMPLOYEES BACK
TO THE OFFICE

With the hope of employees returning to the office fading once Labor Day passed, most Owners were left
disappointed with tenant occupancy remaining close to 15%. Based on discussions with industry thought
leaders, here’s what some suggest will need to happen to office buildings for the workforce to eventually
want to return to the office.
A CHANGE IN FUNCTION AND PURPOSE:
With many companies and employees realizing their work can be accomplished remotely, offices going
forward will need to provide resources that a home office cannot. For each company, the layout they create
and amenities they provide will vary based on what their employees need from their physical office. Some
companies may find their employees lack a quiet, dedicated space at home, so their office will need to
provide productivity and focus. Other companies may find collaboration and mentorship is missing from
virtual offices and need to make changes to promote more idea sharing and teaming at the office. Several
architects predict an even greater “amenities race”, taking the live-work-play model to a new level to
entice employees into the office through convenience and excitement. Whatever the driving factor for a
company’s employee base, the office needs to provide something an at-home office cannot, or employees
will not feel the need to return.
TECHNOLOGY:
While companies have quickly transitioned to working from home, offices will now need to similarly
upgrade their office technology to create seamless interactions between employees in the office and those
working virtually. Advances in video conferencing and collaboration technology will be important in bridging
the gap. Some tech companies are working on recreating the “water cooler” chats and idea sharing virtually
while others are continuing to improve video conferencing to make virtual employees feel like they are
really in the room. Additionally, technology to track the work environment will become more important.
For example, an app that can show occupancy levels of the office, air quality, or the last space cleaning will
be important for employees’ peace of mind.
HEALTH:
While WELL Certifications and the overall healthiness of buildings was a growing trend Pre-COVID, it is
expected to be a major factor in tenant decisions moving forward. Tenants will be asking owners to provide
real-time data on their air quality, fresh air into their office space, or outdoor amenities. Some architects
see the potential for ground floor retail to be converted by building owners into amenity spaces with fresh
air – potentially as conference rooms with operable windows or open-air cafés. Whether through physical
improvements to a building or technological advancement, companies will want to know their building is a
healthy environment for their employees as that is the first hurdle they will be facing.
For owners looking for ways to entice tenants back into their buildings, it is important to understand
what your tenants’ employees need to make the office essential again. Each building will have different
requirements but expect health and technology to be at the forefront of any changes.

Thank you to all of our clients for your continued
t r ust i n R .W. H olmes over the past 44 years. We
wish you and your families continued health and

happiness during these difficult times.

CORPORATE LEADERSHIP TEAM

Garry Holmes Dean Blackey John Eysenbach Craig Johnston Paul McKeon Arthur Amadei
President Managing Director Executive Vice Senior Vice President Director of Senior Vice President
President Finance

David Gilkie Robert Strelke Jim Bartholomew Mike Ogasapian Elizabeth Holmes Samantha Ludwig
Senior Vice President Vice President Vice President Assistant Vice Director of Corporate Marketing
President
Services Manager