AVERAGE R ENTS

Q2 2011

Bo st B o s t o n Of f ice Office

225 Franklin Street Boston, MA 02110 (617) 951-4100 www.lpcboston.com

Research
Introduction
Rental rates, and their fluctuations, are maybe the most important indicators of the health of a market. Development projects, investment activity and corporate costs are all tied to how rental rates are adjusting to economic conditions. Vacancy and unemployment levels are certainly important factors when studying commercial real estate conditions; however, rental rates are what can make or break a budget. As most real estate experts would attest to, if the pricing doesnt work, than the deal shouldnt happen. It is for this reason that Lincoln Property Company Boston has dedicated a condensed bi-quarterly report to addressing the average asking rate from a submarket and individual city level to explore which areas of the Greater Boston office market are improving, versus those that are slipping. Some cities have a limited supply or may be well leased; therefore these were omitted due to a lack of data. If this report does not address a Massachusetts city you are interested in, please contact one of Lincoln Property Companys leasing representatives and they will gladly assist you.

Q2 2011

Congratulations to the Boston Bruins

Executive Summary
For Greater Boston the average asking rate for office space declined by 3.1 percent from Q2 2010. Despite the overall negative trend, the leading markets of Boston, Cambridge and Route 128 West have either increased or measured only a slight decrease in their average rents. Looking more closely, the submarkets of the Financial District, Back Bay, East Cambridge and the city of Waltham have all rebounded nicely since their rents all hit bottom in 2010. On the other hand, Interstate 495 continued to be plagued by rent decreases. These submarkets have undergone a loss of tenancy since mid-2010 due to better options available along Route 128 and inward. Unfortunately for Interstate 495, this trend is quite common after the Greater Boston market experiences a depression in rents. Therefore, rents along Interstate 495 are expected to lag its closer in neighbors by 2 to 4 quarters in rent recovery. Overall, the Greater Boston office market has hit bottom and has begun to recover. Incremental growth is forecasted for the Greater Boston total average asking rate in the remaining two quarters of 2011.

Lincoln Property Company 225 Franklin Street, 23rd Floor Boston, MA 02110 (617) 951-4100 www.lpcboston.com

Research
Submarket View
Total Greater Boston
495 Northeast

Q2 2011

Q2 2010: Q2 2011:

$26.88/RSF $26.05/RSF -3.1%

Route 3 North 128 North

$/RSF $35

% Change:

Total Greater Boston Rate

$30

Inner Suburbs Route 2 West 128 West

$25

Cambridge
$20

Boston
$15 $10

'06

'07

'08

'09

'10

'11

Mass Pike West 128 South

Measured Rent Growth from Q2 2010 to Q2 2011 Greater than 5% 495 South Between 2% and 5% Between 0% and 2% Between 0% and -2% Between -2% and -5% Greater than -5%

Research
Boston & Cambridge
Boston
Town Price/RSF
Year-Over-Year Change

Q2 2011

Boston
Financial District Back Bay Seaport Charlestown North Station Midtown South Station

$39.27
$42.21 $40.06 $37.40 $27.05 $25.92 $23.71 $23.32

-0.6%
0.3% 3.7% -3.5% -2.1% -3.1% 2.0% -10.6%

The Boston office markets average asking rate fell slightly in early 2011 due to the relatively limited negative net absorption recorded in each submarket. However, the delivery of Atlantic Wharf caused a ripple effect of negative net absorption in the Financial District tower market, contributing to the year-over-year negative 900,000 square feet of absorption measured in that submarket. Fortunately, the additional vacancy did not negatively influence the average asking rate in the Financial District. The rate has steadily improved due to view-space pricing since mid-2010. In the Back Bay, the vacancy rate dropped below 5 percent at the end of Q2, but the availability of tower space has shrunk. Although the submarket was the healthiest, the space available there will not drive rents with much velocity.

Six Month Projection:

Moderate Increase

Cambridge
Cambridge
East Cambridge Mid Cambridge West Cambridge

$35.10
$40.88 $38.18 $28.49

-1.0%
11.9% 8.1% -12.7%

The Cambridge office market observed a slight decrease in the weighted average asking rate due to the square footage available in the inferior submarket, West Cambridge. Both East and Mid Cambridge have displayed rapid rent growth since 2010 due to the increased leasing velocity in both submarkets and the scheduled conversion of office buildings to lab. The vacancy for these two markets sit right below 7 percent, whereas West Cambridge calculated a rate of 17.2 percent at the conclusion of the second quarter. Blackstones market strategy for the newly purchased troubled West Cambridge buildings, 125/150 Cambridgepark Drive, will surely drive the overall rent there since it accounts for over 2/3 of total vacancy in that submarket. Additional rent growth is forecasted for East and Mid Cambridge due to the employment and venture capital growth measured in those submarkets.

Six Month Projection:

Rapid Increase

Tenant Demand
As the graph displays, modest tenant demand is forecasted for Greater Boston office product. Employment has perked up in 2011, but the forecast for demand has been downgraded over the last six months to a slower, more incremental pace than at the conclusion of 2010.

3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% -3.0% '00 '01 '02

Quarter-Over-Quarter Change in Tenant Demand

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

4 Source: PPR

'14

'15

Research
Route 128
128 West
Town Price/RSF
Year-Over-Year Change

Q2 2011

128 West
Wellesley Brookline Lexington Waltham Newton Watertown Needham

$23.62
$31.11 $29.00 $24.76 $24.43 $23.21 $22.20 $22.12

2.5%
0.7% -4.1% 0.6% 3.8% 2.0% -3.5% -2.7%

Due to some significant leasing completed at the newly constructed buildings in Route 128 West, the vacancy rate has recently decreased and rental rates have begun to increase. Waltham, the city with the most newly delivered product measured the greatest improvement in rents at 3.8 percent, but still remains a lower rate than Wellesley and Lexington, both of which also exhibited increases. Newtons average asking rent grew to $23.21 per square foot due to the rent growth calculated along Washington Street. Needhams average asking rent fell slightly since the Highland Avenue properties averaged only slightly above the overall average of $22.12 per square foot. Rent growth is expected to continue for Class A heavy municipalities as tenants upgrade space.

Six Month Projection:

Moderate Increase

128 North
128 North
Burlington Wakefield Woburn Wilmington Lynnfield Beverly Stoneham Peabody Danvers Lynn Salem

$20.01
$23.00 $20.35 $20.09 $19.50 $18.51 $18.41 $17.81 $17.10 $16.54 $15.50 $13.83

-0.8%
2.1% 1.8% -0.7% 0.0% 5.7% 6.5% 6.2% -4.0% -0.3% -3.1% -1.6%

Although the Route 128 North market fell slightly in a year-over-year comparison, the growth measured in Burlington and Wakefield bodes well for future rent growth. The submarkets vacancy rate has fallen year-to-date to 18.2 percent, but that rate remains higher than both the West and South Route 128 submarkets. Significant vacancy was measured in Wilmington (over 37 percent) and Peabody (44.7 percent) at the conclusion of Q2; thus affecting rent growth in those towns. Although Woburn displayed a slight decrease in the average asking rate, the towns vacancy rate sat below the submarket average at just over 16 percent. Beverly and Stoneham calculated rental rate growth since vacancy remained below the submarkets rate and sublease space was very limited.

Six Month Projection:

Slight Increase

128 South
128 South
Westwood Dedham Quincy Rockland Norwood Norwell Briantree Weymouth Brockton Canton Randolph

$19.00
$24.70 $20.80 $20.03 $19.33 $18.36 $18.13 $18.03 $17.00 $16.50 $16.18 $14.67

1.4%
3.3% -0.3% 3.4% -3.4% 0.2% 2.5% 2.2% -8.1% 4.3% -4.4% -14.2%

Route 128 Souths office market fundamentals remained relatively healthy at the conclusion of the second quarter with vacancy at 16.1 percent and limited future availability measured in the submarket. However, in terms of rent growth, the submarket historically moves at a slower pace than its western and northern Route 128 neighbors. Positive rent growth was observed in the following cities since their vacancy rates were lower than the submarkets: Quincy (13 percent vacant), Westwood (13.6 percent) and Brockton (15.4 percent). Canton and Randolph both measured a drop in the average rent due to their high vacancy rates: 23.5 and 38.7 percent respectively. Braintrees rent grew by 2.2 percent, although the vacancy rate recorded in that city was slightly higher than the submarkets at 16.7 percent.

Six Month Projection:

Neutral
5

Research
Interstate 495
495 Mass Pike
Town Price/RSF
Year-Over-Year Change

Q2 2011

495 Mass Pike

Framingham Westborough Natick Southborough Marlborough

$17.69
$19.07 $18.21 $17.23 $16.91 $16.77

-4.2%
-2.4% 1.4% -0.3% -7.3% -6.4%

Like all the Interstate 495 submarket, 495 Mass Pikes average asking rate fell year-over-year by over 4 percent off of woes from Fidelitys Marlborough campus and defaulting properties. The total availability rate of the 495 Mass Pike submarket was 26.1 percent at the conclusion of the second quarter. In Marlborough, the total availability soared to 35.9 percent due to the Fidelitys announcement that they will vacate the market, which sent the average rent down to $16.77 per square foot. Framingham also measured a decline due to its vacancy rate of 17 percent, which sat above the submarkets 16.1 percent vacancy rate as of Q2. Although Southboroughs vacancy rate was a healthy 12.4 percent as of Q2, a few buildings have experienced a rapid tenant vacancy that has resulted in special servicer involvement and a subsequent decline in rents.

Six Month Projection:

Neutral

Route 2 West
Route 2 West
Concord Wayland Boxborough Acton Littleton Maynard

$15.94
$18.50 $17.25 $16.75 $15.68 $14.90 $13.17

-5.2%
0.2% -2.8% -2.9% -2.2% 12.5% 5.4%

Sublease space in Interstate 495 Route 2 West remained above 6 percent at the end of the second quarter, the highest sublease rate of all the Greater Boston submarkets. Typically considered one of the least expensive submarkets in the Boston suburbs, Interstate 495 Route 2 West lived up to its expectations with a measured rate of $15.94 per square foot, making it the most economical option in all of Greater Boston. Acton measured a decline in its average asking rate since the vacancy rate in that township measured 43.8 percent, resulting in a average rent of $14.90. On the other hand, Concords rate grew slightly due to its vacancy rate of 4.2 percent, which is significantly lower than the submarkets overall vacancy rate of 24.6 percent as of Q2.

Six Month Projection:

Neutral

Route 3 North
Route 3 North
Bedford Chelmsford Tewksbury Billerica Lowell

$17.57
$20.25 $18.33 $18.05 $16.25 $16.00

-2.6%
0.8% -1.6% -0.3% -2.9% -2.6%

After losing Dassault Systemes to Waltham last year, the Route 3 North submarkets vacancy has increased and the average asking rate has decreased. The French software company moved from CrossPoint in Lowell, where the vacancy rate measured 25.1 percent at the close of Q2, which sat above the submarket total vacancy rate of 18.6 percent. Bedford, the recent winner of Acme Packets requirement, held a vacancy rate of 11.2 percent, well below the submarkets total. That township holds the highest average asking rate along Interstate 495 at $20.25 besides Raynham in 495 South. Technology tenants are expected to continue to lease space in Route 3 North as the recovery continues, crowning it the sole Interstate 495 submarket with a positive six month outlook.

Six Month Projection:

Slight Increase
6

Research
495 South
Town Price/RSF
Year-Over-Year Change

Q2 2011

495 South
Raynham

$17.62
$22.33 $18.00 $17.75 $17.42

-5.7%
8.9% -10.6% 0.0% 1.7%

Foxboro Franklin Mansfield

Interstate 495 Souths average asking rate fell by over 5 percent year-overyear due in most part to the gain in vacancy in the first half of 2011 of the submarkets largest township, Foxboro. The total vacancy rate in the Interstate 495 South submarket was over 23 percent, but Foxboros was well above 30 percent at the conclusion of Q2. The amount of space now vacant in Foxboro resulted in the average asking rates 10+ percent decrease year-over-year. Both Raynham and Mansfield measured growth in their average asking rates due to the below market vacancy recorded in those towns in the second quarter: 9 percent and 21.4 percent respectively. Overall, not much movement in the average rent is anticipated in the second half of 2011 as leasing velocity for office space along 495 South remains limited.

Six Month Projection:

Slight Decrease

495 Northeast
495 Northeast
Andover North Andover

$16.87
$18.13 $12.50

-5.3%
-4.7% -18.70

With only two towns covering over 85 percent of the Interstate 495 Northeast submarket (Andover and North Andover combine for a total over 3 million square feet. The total square footage tracked by LPC in 495 Northeast is just over 3.5 million). In North Andover, rates have fallen to between $10.00 to $15.00 per square foot along Turnpike Street, thus resulting in the $12.50 average rent and subsequent 18.7 percent year-over-year decline. In Andover, the vacancy rate of 25.8 percent recorded in the second quarter was only slightly lower than the submarkets average of 26.7 percent. Overall, the decrease in rents in the Interstate 495 Northeast submarket are primarily due to the high vacancy rate and the lack of tenant activity.

Six Month Projection:

Slight Decrease

Quarter-Over-Quarter Projected Rent Growth

Boston

Source: PPR

%
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0
Q4 2011 Q2 2012

Cambridge

Route 128

Interstate 495

Q4 2012

Q2 2013

Q4 2013

Q2 2014

Q4 2014

Q2 2015

Q4 2015

Research
Comparing Average Rents
Current Position/ Q4 2010 Position 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53

Q2 2011

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

Boston 1 Cambridge 2 Wellesley 3 Brookline 4 Lexington 5 Westwood 6 Waltham 9 Newton 12 Burlington 7 R aynham Watertown 8 Needham 11 Hingham Dedham 10 Wakefield 16 Bedford 15 Woburn 13 Quincy 18 Wilmington 14 Rockland 22 Framingham 20 Lynnfield 19 Concord 28 Beverly 38 Nor wood 25 Chelmsford 27 29 Westborough Andover 24 Nor well 23 Tewksbur y 30 Braintree 36 Foxboro 17 31 Stoneham 33 Franklin 37 Mansfield 40 Wayland 42 Natick 35 Peabody 32 Southborough 26 Marlborough 39 Boxborough 45 Danvers 51 Brockton Littleton 53 Billerica 47 Canton 50 Lowell 43 Acton 44 Lynn 46 R andolph 34 Salem 54 Maynard 41 49 North Andover

$24.76

Top 20 Class A & B Average Rents

$20.03

Class A
Financial District Back Bay Seaport District East Cambridge Mid Cambridge Wellesley Brookline West Cambridge Newton Waltham Westwood Midtown Lexington Charlestown Needham Dedham Burlington Wakefield Bedford Woburn $46.18 $44.85 $44.67 $42.32 $39.67 $32.81 $30.50 $29.13 $27.63 $27.05 $26.25 $26.00 $25.61 $25.50 $25.40 $24.25 $24.11 $23.38 $22.17 $21.58

Class B
Mid Cambridge Back Bay Weston East Cambridge Wellesley Financial District Charlestown Brookline Seaport District South Station North Station West Cambridge Midtown Lexington Watertown Newton Raynham Waltham Hingham Burlington $33.93 $33.37 $30.00 $29.83 $29.59 $28.77 $27.50 $27.50 $27.39 $26.83 $25.92 $24.14 $23.57 $23.81 $22.50 $22.37 $22.33 $22.02 $22.00 $20.76

$18.00

All Rents /RSF

$16.00

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00
8

In $/RSF Gross

Research
Average Rents by City
City
Acton Andover Back Bay Bedford Beverly Billerica Boxborough Braintree Brockton Brookline Burlington Canton Charlestown Chelmsford Concord Danvers Dedham East Cambridge Financial District Foxboro Framingham Franklin Hingham Lexington Littleton Lowell Lynn Lynnfield Mansfield Marlborough Maynard Midtown Mid Cambridge Natick Needham Newton North Andover North Station Norwell

Q2 2011

Submarket
Route 2 West 495 Northeast Boston Route 3 North 128 North Route 3 North Route 2 West 128 South 128 South 128 West 128 North 128 South Boston Route 3 North Route 2 West 128 North 128 South Cambridge Boston 495 South 495 Mass Pike 495 South 128 South 128 West Route 2 West Route 3 North 128 North 128 North 495 South 495 Mass Pike Route 2 West Boston Cambridge 495 Mass Pike 128 West 128 West 495 Northeast Boston 128 South

Q2 2010
$16.03 $19.02 $38.64 $20.08 $17.29 $18.13 $17.25 $17.65 $15.82 $30.25 $22.52 $16.93 $27.63 $18.63 $18.46 $16.59 $20.86 $36.55 $42.08 $20.13 $19.53 $17.75 $23.00 $24.61 $13.25 $16.42 $16.00 $17.52 $17.13 $17.92 $12.50 $23.24 $35.31 $17.28 $22.74 $22.75 $15.38 $26.76 $17.68

Q2 2011
$15.68 $18.13 $40.06 $20.25 $18.41 $16.25 $16.75 $18.03 $16.50 $29.00 $23.00 $16.18 $27.05 $18.33 $18.50 $16.54 $20.80 $40.88 $42.21 $18.00 $19.07 $17.75 $22.00 $24.76 $14.90 $16.00 $15.50 $18.51 $17.42 $16.77 $13.17 $23.71 $38.18 $17.23 $22.12 $23.21 $12.50 $25.92 $18.13

% Change
-2.2% -4.7% 3.7% 0.8% 6.5% -10.4% -2.9% 2.2% 4.3% -4.1% 2.1% -4.4% -2.1% -1.6% 0.2% -0.3% -0.3% 11.9% 0.3% -10.6% -2.4% 0.0% -4.3% 0.6% 12.5% -2.6% -3.1% 5.7% 1.7% -6.4% 5.4% 2.0% 8.1% -0.3% -2.7% 2.0% -18.7% -3.1% 2.5%

City
Norwood Peabody Quincy Randolph Raynham Rockland Salem Seaport District Southborough South Station Stoneham Tewksbury Wakefield Waltham Watertown Wayland Wellesley Westborough Westwood West Cambridge Wilmington Woburn

Submarket
128 South 128 North 128 South 128 South 495 South 128 South 128 North Boston 495 Mass Pike Boston 128 North Route 3 North 128 North 128 West 128 West Route 2 West 128 West 495 Mass Pike 128 South Cambridge 128 North 128 North

Q2 2010
$18.33 $17.81 $19.38 $17.10 $20.50 $20.00 $14.05 $37.40 $18.25 $26.08 $16.77 $18.11 $19.99 $23.53 $23.00 $17.75 $30.90 $17.96 $23.90 $32.64 $19.50 $20.23

Q2 2011
$18.36 $17.10 $20.03 $14.67 $22.33 $19.33 $13.83 $36.08 $16.91 $23.32 $17.81 $18.05 $20.35 $24.43 $22.20 $17.25 $31.11 $18.21 $24.70 $28.49 $19.50 $20.09

% Change
0.2% -4.0% 3.4% -14.2% 8.9% -3.4% -1.6% -3.5% -7.3% -10.6% 6.2% -0.3% 1.8% 3.8% -3.5% -2.8% 0.7% 1.4% 3.3% -12.7% 0.0% -0.7%

Submarket Totals
Submarket
Boston Cambridge 128 West 128 North 128 South 495 Mass Pike Route 2 West Route 3 North 495 South 495 Northeast Total

Market
Boston Cambridge Route 128 Route 128 Route 128 Interstate 495 Interstate 495 Interstate 495 Interstate 495 Interstate 495

Q2 2010
$39.50 $35.46 $24.24 $20.18 $18.74 $18.46 $16.82 $18.04 $18.68 $17.05 $26.88

Q2 2011
$39.27 $35.10 $24.84 $20.01 $19.00 $17.69 $15.94 $17.57 $17.62 $16.14 $26.05

% Change
-0.6% -1.0% 2.5% -0.8% 1.4% -4.2% -5.2% -2.6% -5.7% -5.3% -3.1%

All the above weighted average rental rates are derived from quoted rates provided by the leasing entity on the assets Lincoln Property Company tracks. All rates are gross (excluding tenant electricity) and the weighted averages exclude sublease asking rates.

Research
2011 R ecently Completed Leases/Sales
Esdaile, Barrett & Esdaile 7,600 RSF 75 Federal Street, Boston Tenant Rep. - Roberto Magno, CPA

Q2 2011

L I N C O LN U PD AT ES INC P D A TE S
Beckwith Realty LLC 177,350 RSF (Sale) 30 Industrial Way, Wilmington Landlord Rep. - Gregory H. Cahill & Rob Cronin Lattice Engines 8,100 RSF 85 Devonshire Street, Boston Landlord Rep. - Roberto Magno, CPA & Brendan Miller Shore Educational Collaborative 20,000 RSF 10 Forbes Road, Braintree Landlord Rep. - Ellison Patten

Taylor & Partners 2,300 RSF 77 Summer Street, Boston Tenant Rep. - Brian Smallman

Broadview Networks 10,800 RSF Presidents Place, Quincy Landlord Rep. - Ellison Patten

Peregrine Financial Corporation 2,300 RSF 84 State Street, Boston Landlord Rep. - John D. Miller & Jeffrey C. Moore & Brendan Miller

About Women by Women 7,000 RSF 30 Washington Street, Wellesley Tenant Rep. - Kevin P. Malloy & Tim Latham

LPC in MA

LPC Thank s
Cambridge
1 property: 277,800 RSF 3 properties: 287,000 RSF 5 properties: 229,800 RSF

Boston
3 properties: 270,600 RSF 5 properties: 572,600 RSF 29 properties: 4,196,600 RSF

Leasing Leasing & Management Management Route 495 Route 128 Inner Suburbs Cambridge Boston

For awarding Lincoln Property Companys downtown brokerage and management team with the 38 Chauncy Street in Boston assignment.

10

Research

Q2 2011

T ER M I N O L O G Y ER LO
Asking Rental Rate: the dollar per square foot amount that is quoted by the entity that is representing the space being marketed. Sublease: space that is marketed on behalf of the current Tenant. Deliveries: newly completed product that was recently under construction or renovation that are available for immediate occupancy. Tenant Improvements (T.I.): typically a dollar per square foot amount negotiated during the lease transaction that is paid to a tenant by the landlord, or sublandlord, for the means of improving the condition of the agreed upon space.

Direct: space that is marketed on behalf of the Landlord.

Flex: product that is capable of hosting tenants that vary in their use of commercial real estate. Including office, lab, R&D, warehouse, manufacturing and distribution tenants.

Total Availability (A.K.A. Overall Availability): all space that is available for lease. Includes marketed occupied space, sublease, and product under construction that will be delivered within two (2) years.

Free Rent: the time period the tenant does not have to pay any rent, which is agreed upon by the tenant and landlord during lease negotiations.

Vacant Available: all space that is currently available to lease and immediately occupy; therefore, space that is not hosting a tenant. Unoccupied space with a future commitment are excluded. Weighted Average Rent: the average of all asking rents recorded for a particular set of buildings with each recorded rent holding a level of influence based on the total square footage of direct availability (not sublease) marketed under the rate surveyed.

Net Absorption: the change in direct vacancy over a measured time frame. Includes newly delivered product ready for occupancy, but does not include sublease.

Lincoln Property Companys Average Rates report is produced by the Boston Offices research team in collaboration with our Downtown and Suburban Brokerage Group. If you have any questions regarding market conditions and the information found in this report, please contact Scott D. Faber, Director of Research at sfaber@lpc.com.

All information provided in Lincoln Property Companys Average Rates report are from sources deemed reliable, but no warranty or representation is made as to its accuracy thereof and same is submitted subject to errors, omissions, or other conditions.

(617) 951-4100 www.lpcboston.com

11