METRO BOSTON MARKET REPORT… · Q3 17 MARKET REPORT METRO BOSTON. 2 Committed to Boston, Connected...
Transcript of METRO BOSTON MARKET REPORT… · Q3 17 MARKET REPORT METRO BOSTON. 2 Committed to Boston, Connected...
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 1
INSIDE STATISTICS...
OPTIMISM GROWS IN BOSTON CRE MARKETS
303 Congress Street | Boston, MA 02210 | 617.457.3400
www.NAIHunneman.com
OFFICE (DOWNTOWN, CAMBRIDGE, SUBURBAN)
INDUSTRIAL (WAREHOUSE, FLEX/R&D, MANUFACTURING)
CAPITAL MARKETS
Q3 2017
MARKET REPORTM E T R O B O S T O N
Committed to Boston, Connected to the World.2
OFFICE STATISTICS OVERVIEW
TOTAL VACANCY RATE
DIRECT VACANCYQ3 NET
ABSORPTION (SF)ASKING RENT
($/SF)UNDER
CONSTRUCTION (SF)
11.6% 10.6% 255,470 $34.04 3,867,977
ASKING RENT
LEASING ACTIVITY
12-MONTH ABSORPTION
SUBLEASE VACANCY
DIRECT VACANCY
MA Business Confidence Index:
61.2 OUT OF 100 (Aug 2017)
Boston Unemployment Rate:
3.5% (Aug 2017)
Boston Office-using Employment:
17,400 Jobs added 2.3% Growth year-over-year
State Tech & Science Index:
NO. 1 by Milken Institute
MA Economy Ranked:
NO. 5 by USNews
Third Quarter Ends with Mixed ResultsDespite a somewhat pedestrian third quarter, optimism continues to grow in the Boston market. Absorption was positive this quarter, with the Route 128 Belt driving much of the activity, but total office vacancies inched up to 11.6% due to speculative construction in Waltham and Newton. The general trend of urban migration among office tenants continues, with PTC and Alexion joining the growing list of companies moving downtown. Facebook and WeWork have also committed to increasing their footprint in the city. While tenants are expanding in the suburbs, those currently out with requirements are likely considering a downtown relocation as well. Moreover, several large blocks of space coming back to the suburban market remain a risk to the near-term outlook. While overall absorption may increase in the coming quarters, demand growth will likely fail to reach levels Greater Boston has seen in recent years (barring Boston being selected for Amazon’s HQ2).
With the groundbreaking of a handful of projects, office construction ticked up to almost 3.9 million SF in the third quarter. athenahealth recently broke ground on a 350,000-square-foot expansion at Arsenal Yards in Watertown and DivcoWest is moving forward with the first 450,000-square-foot office building at its NorthPoint development in Cambridge. The Abbey Group also recently filed plans for its redevelopment of the Flower Exchange site in the South End. The project will include more than 600,000 square feet of office space.
An eight-million-square-foot elephant entered the office market this quarter, and its potential impact on the Greater Boston market has been discussed,
dissected and pondered in detail by nearly every commercial real estate professional in the state. Since Amazon announced plans to establish a second headquarters in the U.S., the industry has been upended by rampant speculation as to who will be able to woo the e-commerce giant. All told Amazon’s HQ2 will bring 50,000 jobs to the winning metro area and require upwards of 8-10 million square feet of office space; mirroring their existing headquarters in Seattle. While Amazon has yet to identify any frontrunners, consensus puts Greater Boston on a short-list of viable contenders. Other metro areas being tossed around with Boston include Austin, Denver, Atlanta, Chicago and Washington D.C. However, with more than 100 cities interested in bidding for HQ2, the competition will be stiff.
Looking locally, finding sites that could actually accommodate a campus of this size as well as meet the firm’s requirements/preferences is a little trickier. With that said, several sites throughout the metro have been touted as options for Amazon’s HQ2. HYM’s Suffolk Downs in Revere has emerged as a leader, as the redevelopment site boasts 161 acres of land, proximity to Logan Airport and superior MBTA access via the Blue Line. Other redevelopment sites in Boston, like the Flower Exchange and the Post Office’s sorting facility near South Station, have also come up in discussions. Outside of Boston, Cambridge’s Volpe Center redevelopment and the NorthPoint site as well as Weymouth’s Union Point are also potential contenders. Amazon is expected to make a final decision regarding HQ2 sometime next year and while the outcome is unclear, Boston is well-positioned to land this white whale.
2017Q3
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 3
TOTAL INVENTORY
(SF)
TOTAL VACANT
(SF)
TOTAL VACANCY
RATE
Q3 NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT ($/SF)
Class A 48,754,813 3,970,641 8.1% (14,784) (80,392) $62.09
Class B 20,818,966 1,879,733 9.0% 26,248 (131,056) $48.28
CLASS A & B TOTAL 69,573,779 5,850,374 8.4% 11,464 (211,448) $57.61
Recent Construction
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Leased Available
Vacancy and Net Absorption
Class A & B Rents
0%
2%
4%
6%
8%
10%
12%
-400,000
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$0
$10
$20
$30
$40
$50
$60
$70
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Class B Class A
Vacancy and Net Absorption
Class A & B Rents
0%
2%
4%
6%
8%
10%
12%
-400,000
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$0
$10
$20
$30
$40
$50
$60
$70
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Class B Class A
VACANCY AND NET ABSORPTION
TENANT ADDRESS SIZE SUBMARKET TYPE
PTC 121 Seaport Blvd 221,531 SeaportRelocation/Expansion
Alexion 121 Seaport Blvd 178,787 SeaportRelocation/Expansion
CloudHealth Technologies
100 Summer Street
80,000Financial District
Relocation/Expansion
Hinckley Allen 28 State Street 52,000Financial District
Renewal
WeWork200 Portland Street
39,790 North Station Expansion
NOTABLE TRANSACTIONS
DOWN
TOWN
CLASS A & B RENTS
RECENT CONSTRUCTION
OFFICE STATISTICS DOWNTOWN
TRENDS• Negligible net absorption and the newly-renovated 66 Long Wharf coming on line
pushed vacancies up 10 basis points in the third quarter.
• The latest wave of suburban-to-urban migration has hit the Seaport. PTC signed a lease for roughly half of 121 Seaport and plans to relocate its headquarters from Needham in 2019. Alexion, which is consolidating operations from several locations including Lexington, is slated to occupy the remainder of the building and bring it to full occupancy.
• In September, Reebok began shifting its workforce from Canton to its new headquarters at the Innovation & Design Center in the Seaport.
• WeWork continues to grow its footprint both locally and nationally. The coworking giant’s 39,790-square-foot lease at 200 Portland Street will be its fifth Boston-area location. Reportedly, the firm is also looking for additional locations throughout the Downtown markets.
• Natixis recently moved into its new space at 888 Boylston Street, vacating several floors at nearby 399 Boylston Street.
• Thomson Reuters is subleasing more than 70,000 square feet of space across several buildings on Thomson Place in the Seaport. CloudHealth Technologies is also subleasing roughly 30,000 square feet at 280 Summer Street in anticipation of its relocation to the Financial District.
Committed to Boston, Connected to the World.4
OFFICE STATISTICS CAMBRIDGE
TRENDS
• Net absorption in Cambridge’s office market was slightly negative in the third quarter, pushing vacancies up 20 basis points over the quarter.
• Sublease space accounts for half of Cambridge’s total vacancies with the former Biogen space at 105 Broadway making up the lion’s share.
• Harvard University’s IT division leased the entirety of Infinity Pharmaceuticals’ former office space at 784 Memorial Drive.
• Facebook inked a deal for 132,636 square feet at 100 Binney Street, which is predominantly a lab building currently under construction in Kendall Square. The social media giant will relocate from 1 Broadway and plans to house 650 employees in the expanded space.
• Dirt is moving in Cambridge. MIT is underway on 314 Main Street, which will include 345,000 square feet of office space. DivcoWest is also constructing a 430,000-square-foot office-lab building as part of the first phase of the long-awaited NorthPoint development. Finally, work has begun on the “Akamile” — Akamai Technologies’ new 486,000-square-foot headquarters.
• Last quarter, Cambridge Systematics vacated 29,513 square feet at 100 Cambridgepark Drive; relocating to Medford.
• The American Red Cross has listed its 37,000-square-foot office at 139 Main Street for lease and Twitter is subleasing 15,877 square feet at 141 Portland Street.
• The Davis Companies paid $44.5MM or $323/SF for 625 Mount Auburn Street at a 5.8% cap rate. This represents a 50% increase from the asset’s previous sale price in 2007.
TOTAL INVENTORY
(SF)
TOTAL VACANT
(SF)
TOTAL VACANCY
RATE
Q3 NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT ($/SF)
Class A 7,036,443 414,380 5.9% (25,243) (179,949) $65.58
Class B 3,318,193 36,848 1.1% 10,052 5,286 $64.43
CLASS A & B TOTAL 10,354,636 451,228 4.4% (15,191) (174,663) $65.49
TENANT ADDRESS SIZE SUBMARKET TYPE
Intersystems 1 Memorial Drive 238,000 East CambridgeRenewal/Expansion
Facebook 100 Binney Street 132,636 East CambridgeRelocation/Expansion
Google 4 Cambridge Center 70,820 East Cambridge Renewal
Harvard University 784 Memorial Drive 63,175 Mid Cambridge Relocation
Construction
0
100,000
200,000
300,000
400,000
500,000
600,000
Q12015
Q32015
Q12016
Q32016
Q12017
Q32017
Q12018
Q32018
Q12019
Q32019
Leased Available
Vacancy and Net Absorption
Class A & B Rents
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
(300,000)
(200,000)
(100,000)
0
100,000
200,000
300,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$0
$10
$20
$30
$40
$50
$60
$70
$80
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Class B Class A
Vacancy and Net Absorption
Class A & B Rents
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
(300,000)
(200,000)
(100,000)
0
100,000
200,000
300,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$0
$10
$20
$30
$40
$50
$60
$70
$80
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Class B Class A
VACANCY AND NET ABSORPTION
NOTABLE TRANSACTIONS
CLASS A & B RENTS
CONTIGUOUS BLOCKS
CAMBRIDGE
2017Q3
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 5
TOTAL INVENTORY
(SF)
TOTAL VACANT
(SF)
TOTAL VACANCY
RATE
Q3 NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT ($/SF)
Class A 58,353,243 7,370,023 12.6% 76,842 116,987 $29.20
Class B 53,240,896 8,475,891 15.9% 182,355 564,776 $21.81
CLASS A & B TOTAL 111,594,139 15,845,914 14.2% 259,197 681,763 $25.16
TENANT ADDRESS SIZE SUBMARKET TYPE
Smith & Nephew150 Minuteman Road, Andover
112,148Route 495 Northeast
Renewal
National Grid404 Wyman Street, Waltham
68,145Route 128 West
Sublease
Steward Health Care
89 A Street, Needham
52,079Route 128 West
Expansion
Corbus Pharmaceuticals
500 River Ridge Drive, Norwood
32,733Route 128 South
Relocation/Expansion
Optos500 Nickerson Road, Marlborough
23,209Route 495 West
Relocation
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Leased Available
Class A & B Rents
Construction
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
(800,000)
(600,000)
(400,000)
(200,000)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$0
$5
$10
$15
$20
$25
$30
$35
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Class B Class A
Class A & B Rents
Construction
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
(800,000)
(600,000)
(400,000)
(200,000)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$0
$5
$10
$15
$20
$25
$30
$35
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Class B Class A
VACANCY AND NET ABSORPTION
NOTABLE TRANSACTIONS
CLASS A & B RENTS
RECENT CONSTRUCTION
OFFICE STATISTICS SUBURBAN
TRENDS
• Despite posting positive absorption in the third quarter, delivery of vacant Two Wells Avenue in Newton and 200 Smith Street (Post) in Waltham pushed Suburban office vacancies up by 20 basis points compared to last quarter.
• Computershare (250 Royall Street, Canton), Aspect Software (300 Apollo Drive, Chelmsford) and Covidien (9-11 Hampshire Street, Mansfield) vacated space this quarter.
• Several other large blocks of space are coming back to the market over the next 12-18 months. SunLife is leasing 124,000 square feet in Wellesley, Alexion will be closing its facility at 33 Hayden Avenue in Lexington in favor of the Seaport, Shire is subleasing 104,000 square feet at 235 Wyman Street, and Simplivity is vacating space on Technology Drive in Westborough. Progress Software and Constant Contact are close to inking deals to relocate within the suburbs.
• Steward Health Care will join SharkNinja at the newly-constructed 89 A Street in Needham, leasing 52,000 square feet in the third quarter.
• In August, NBCUniversal finalized it’s purchase of the 165,000-square-foot 189 B Street in Needham for its regional headquarters; paying $41.7MM or $124/SF. The building is slated to deliver in early 2019.
• Digital Federal Credit Union is expanding its footprint and has acquired the former Kronos headquarters at 297 Billerica Road in Chelmsford.
SUBURBAN
Committed to Boston, Connected to the World.6
INDUSTRIAL STATISTICS OVERVIEW
ASKING RENT
LEASING ACTIVITY
12-MONTH ABSORPTION
SUBLEASE VACANCY
DIRECT VACANCY
TOTAL VACANCY RATE
DIRECT VACANCYQ3 NET
ABSORPTION (SF)ASKING RENT
($/SF)UNDER
CONSTRUCTION (SF)
7.4% 7.2% 257,661 $8.61 1,748,500
Industrial Market Growth ContinuesThe Greater Boston industrial market absorbed roughly 260,000 square feet of space in the third quarter of 2017 and vacancy remains near record lows, with single-digit numbers in all but one submarket. While leasing activity has waned, demand drivers remain vast and varied. Growing interest from new entrants to the market is a positive sign as well; pointing to Greater Boston’s increasing visibility and greater national appeal. Such solid fundamentals and a dearth of quality product have led to continued rent growth, even among lower-quality assets, reaching 9.3% in the past 12 months.
A handful of local users have begun major expansion projects recently. Insulet kicked off its new 300,000-350,000-square-foot manufacturing facility at 100 Nagog Park in Acton during the third quarter and Siemens is underway on a 300,000-square-foot expansion at its campus in Walpole. Maxon Precision Motors is also constructing a 59,000-square-foot manufacturing facility in Taunton. While projects continue to move through the planning pipeline, new construction has struggled to keep pace with the industrial market’s outsized demand this cycle. The market should be able to absorb any new product coming on line in the near future.
To accommodate larger ships in a post-Panama Canal expansion world, ports throughout the country have been eyeing dredging projects. The deepening of Boston’s Conley Terminal has been on our radar for a few years and the project is finally making some headway. Local officials and the US Army Corps of Engineers kicked off the planned infrastructure improvements in September, which will take 3.5 years and two phases to complete. The first phase will establish an area where the sediment being
dredged can be moved to. The second phase will involve the deepening of three shipping channels. The Outer Channel will go from 40 to 51 feet in depth, the Main Shipping Channel will go from 40 to 47 feet in depth and the Reserve Channel will also go from 40 to 47 feet in depth. These improvements will allow more cargo traffic to flow through the Port of Boston, boding well for the local industrial market and economic growth.
Last-mile distribution has become the darling of the industrial market. The advent of 1-hour delivery and consumers’ need for convenience are driving demand for older, industrial product in infill locations throughout Boston. Moreover, industry experts suspect Amazon’s acquisition of Whole Foods is a logistics play, giving the e-commerce giant direct access to some of the nation’s wealthiest and densest zip codes. Look for more growth in Boston’s urban industrial markets from Amazon and its competitors as consumer spending patterns continue to evolve.
Conversely, infill locations are in high demand from investors and developers alike. Large-scale redevelopment projects are on tap for the Flower Exchange site and Widdett Circle (both in Boston) while plans for sites in Needham and Newton continue to move forward. The Boston Flower Exchange has already made the move to Chelsea and the Abbey Group is planning to create a tech and life science hub on their former site in the South End. Food wholesalers clustered in Widdett Circle announced plans to sell their current property and relocate to a new facility at the Raymond L. Flynn Marine Park in the Seaport. This trend will likely continue as demand for other commercial and residential uses drive the redevelopment of more urban infill locations.
Containerized Cargo:
151,560 TEUS (YTD Aug 2017) 9.7% Growth year-over-year
Manufacturing Output:
10.10% of GSP (2015)
Housing Permits:
9,421 (YTD Aug 2017) 24% Increase year-over-year
Industrial Employment:
822,900 MA Jobs (Aug 2017) 0.0% Growth year-over-year
Biopharma MFG Employment:
10,616 MA Jobs (Dec 2015) 6.3% Growth year-over-year
2017Q3
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 7
Recent Construction
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Leased Available
Vacancy and Net Absorption
Warehouse Rents
0%
2%
4%
6%
8%
10%
12%
(400,000)
(200,000)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$5.00
$5.25
$5.50
$5.75
$6.00
$6.25
$6.50
$6.75
$7.00
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Vacancy and Net Absorption
Warehouse Rents
0%
2%
4%
6%
8%
10%
12%
(400,000)
(200,000)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$5.00
$5.25
$5.50
$5.75
$6.00
$6.25
$6.50
$6.75
$7.00
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
VACANCY AND NET ABSORPTION
WAREHOUSE RENTS
RECENT CONSTRUCTION
INDUSTRIAL STATISTICS WAREHOUSE
TOTAL INVENTORY
(SF)
TOTAL VACANT
(SF)
TOTAL VACANCY
RATE
Q3NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT ($/SF)
TOTAL 90,882,417 5,947,318 6.5% 408,298 209,451 $6.88
TENANT ADDRESS SIZE SUBMARKET TYPE
Draka Cableteq656 Joseph Warner Bouelvard, Taunton
242,640Route 495 South
Owner-User Sale
Barletta Engineering
980 Turnpike Street, Canton
60,000Route 128 South
Owner-User Sale
National Development
130 Eastern Avenue, Chelsea
37,460 Urban Core Sale
AC Adventures LLC
191 Mechanic Street, Bellingham
35,000Route 495 South
Lease
Cambridge Sound Management
3 Normac Road, Woburn
16,500Route 128 North
Lease
NOTABLE TRANSACTIONS
TRENDS• Greater Boston’s warehouse market posted 408,298 square feet of positive absorption
in the third quarter, pushing vacancies down by 40 basis points compared to last quarter.
• Move-ins from Mancon at 200 Shuman Avenue in Stoughton and Lifoam at 351 Holt Road in Andover drove absorption this quarter.
• Landlords continue to push lease rates in the local warehouse market as fundamentals remain positive. Year-over-year, asking rents have increased by more than 9% to $6.88 per square foot this quarter.
• Owner-user sales continue to drive activity. Two of the largest transactions were Draka Cableteq’s purchase of the 242,640-square-foot 656 Joseph Warner Boulevard in Taunton and Barletta Engineering’s acquisition of the 60,000-square-foot 980 Turnpike Street in Canton.
• Reportedly, the sale of M.S. Walker’s former warehouse at 750 Everett Street in Norwood is nearly complete. The 162,695-square-foot building is currently vacant.
• Speedline Technologies vacated 120,000 square feet at 16 Forge Park in Franklin and relocated to 35 Parkwood Drive in Hopkinton. Brede/Allied Convention Services vacated the 190,033-square-foot 100 Industrial Park Road in Hingham as well this quarter.
• Williams-Sonoma is giving back more than 100,000 square feet of space at 176 Grove Street in Franklin.
WAREHOUSE
Committed to Boston, Connected to the World.8
INDUSTRIAL STATISTICS FLEX / R&D
TOTAL INVENTORY
(SF)
TOTAL VACANT
(SF)
TOTAL VACANCY
RATE
Q3 NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT NNN
($/SF)
TOTAL 50,379,098 5,281,779 10.5% (56,947) 337,651 $10.88
Recent Construction
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Leased Available
Vacancy and Net Absorption
Flex / R&D Rents
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
(100,000)
(50,000)
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Vacancy and Net Absorption
Flex / R&D Rents
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
(100,000)
(50,000)
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
VACANCY AND NET ABSORPTION
FLEX / R&D RENTS
RECENT CONSTRUCTION
TENANT / BUYER ADDRESS SIZE SUBMARKET TYPE
iRobot Corp.The XChange, Bedford
208,686 Route 128 Northwest
Renewal/Expansion
Anika Therapeutics
32 Wiggins Avenue, Bedford
134,000 Route 128 Northwest
Renewal
Watson-Marlow Bredel Inc.
37 Upton Drive, Wilmington
50,000 Route 128 North
Renewal/Expansion
Clear Motion400 Research Drive, Wilmington
28,473 Route 128 North
Relocation
AmericanBio20 Dan Road, Canton
23,406 Route 128 South
Relocation
NOTABLE TRANSACTIONS
TRENDS
• In one of the largest lease transactions of the year, iRobot renewed its office and flex space at The XChange in Bedford and expanded by roughly 5,000 square feet.
• Cisco Systems put 1414 Massachusetts Avenue in Boxborough on the market for $6.25MM and vacated the building, accounting for the majority of negative absorption in Flex/R&D market this quarter.
• Biofuel company, Joule Unlimited, is winding down operations amid layoffs and vacating 50,000 square feet at 18 Crosby Drive in Bedford.
• Construction concluded on HighRes Biosolution’s 80,000-square-foot building at 102 Cherry Hill Drive in Beverly. The firm relocated their operations from 299 Washington Street in Woburn.
• Siemens broke ground on a 300,000-square-foot expansion at its campus in Walpole this summer. The development, which will take four years to complete, will include manufacturing, warehouse, lab and office space.
• In July, R.J. Kelly purchased a 521,000-square-foot, 7-property Flex/R&D portfolio at the Cherry Hill Commerce Center in Danvers for $52.8MM or $101/SF. The portfolio was 85% occupied at the time of sale.
FLEX / R&D
2017Q3
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 9
INDUSTRIAL STATISTICS MANUFACTURING
TOTAL
INVENTORY (SF)
TOTAL VACANT
(SF)
TOTAL VACANCY
RATE
Q3 NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT NNN
($/SF)
TOTAL 33,653,700 1,760,431 5.2% (93,690) 322,998 $7.78
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Leased Available
Manufacturing Rents
Recent Construction
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
(800,000)
(600,000)
(400,000)
(200,000)
0
200,000
400,000
600,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
$7.50
$8.00
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Manufacturing Rents
Recent Construction
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
(800,000)
(600,000)
(400,000)
(200,000)
0
200,000
400,000
600,000
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Net Absorption Vacancy
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
$7.50
$8.00
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
VACANCY AND NET ABSORPTION
MANUFACTURING RENTS
RECENT CONSTRUCTION
MAN
UFACTURING
TENANT / BUYER ADDRESS SIZE SUBMARKET TYPE
Port Development LLC
2 Opportunity Way, Newburyport
86,308 Route 495 Northeast
Sale
National Development
960 Massachusetts Avenue, Roxbury
79,000 Urban Core Sale
Automation Solutions
11 Cabot Boulevard, Mansfield
66,968 Route 495 South
Lease
1st Light Energy19 Bonazolli Avenue, Hudson
6,500 Route 495 West
Lease
NOTABLE TRANSACTIONS
TRENDS• A handful of move-outs pushed net absorption in Greater Boston’s manufacturing
market into the red during the third quarter; pushing vacancies up by 20 basis points. Average asking rents are still growing and are nearing $8 per square foot.
• Whitsons Culinary Group is subleasing the entirety of 40 Newmarket Square, located in an area known for food production and distribution, vacating 27,314 square feet of food processing space.
• After selling its warehouse and production facility to Atlantic Management last quarter, Necco has begun to consolidate it’s space at 135 American Legion Highway in Revere; vacating 147,405 square feet in the third quarter.
• Alnylam Pharmaceuticals’ drug manufacturing facility is slated to deliver by the end of the year, bringing 200,000 square feet of space on the market.
• After purchasing the vacant 100 Nagog Park in Acton earlier this year, Insulet Corporation has broken ground on a new manufacturing facility on the site. Zoning changes will allow the new owner to expand the property by 300,000-350,000 square feet, which is expected to be up and running in 2019. Given that the site will also house office space, Insulet could move their headquarters operations (currently in Billerica) there as well.
• National Development acquired a 2.77-acre industrial property in Roxbury; totaling 81,424 square feet across two buildings. The new owner may redevelop the site, which is zoned for a multitude of uses, as it boasts the development potential of 240,000 square feet of commercial space.
Committed to Boston, Connected to the World.10
CAPITAL MARKETS OVERVIEW
INDUSTRIAL SALES VOLUME ($)
RETAIL SALES VOLUME ($)
MULTIFAMILY SALES VOLUME ($)
OFFICE SALES VOLUME ($)
TOP Q3 / INVESTMENT SALES
South End Portfolio1000 Washington St/321 Harrison Ave
Boston
BuyerNordblom Company/CIM Group LP
Price $114,200,000
Total SF 314,410
Price/SF $363
Cap Rate -
Olmsted Place161 S Huntington Avenue
Jamaica Plain
Buyer Bell Partners, Inc.
Price $103,250,000
Units 191
Price/ Unit $524,111
Cap Rate 4.25%
Powder Mill Plaza100 Powdermill Road
Acton
Buyer Medipower
Price $16,300,000
Total SF 75,000
Price/SF $217
Cap Rate -
Rivertech 129 Concord Road
BillericaBuyer
Boston Andes Capital LLC/Jumbo Capital Management
Price $45,000,000
Total SF 285,952
Price/SF $157
Cap Rate -
OFFICE MULTIFAMILY RETAIL INDUSTRIAL
Transaction Volume Continues to SlideAt a macro level, transaction volume continues to slide from its 2015 peak — declining by 28% year-over-year as of July. While falling deal volume may seem concerning, pricing remains stable. Real Capital Analytics’ CPPI expanded by 1.1% from July to August, while CoStar Group’s CCRSI increased by 1.2% in the month of July. The growing bid-ask spread, modest economic growth and interest rate stability are key components driving these trends. Despite the recent slowdown, investment sales in US commercial real estate should remain positive with buyers focusing more on the multifamily and industrial asset classes.
Greater Boston outperformed during the first half of 2017, as the market posted strong pricing gains and increasing sales volume. Activity waned in the third quarter, with the office and retail markets seeing the sharpest declines. Some of this deceleration is likely seasonal, as activity tends to slow in the summer months, but metro-level trends are mirroring those at the national level. Though we may see capital shift from primary to secondary markets in the near future, US commercial real estate remains attractive to foreign investors and Boston remains a key destination for overseas buyers.
Both locally and nationally, multifamily assets are becoming a favorite among investors. Year-to-date, $2.5 billion in assets changed hands in Greater Boston, with nearly 60% of the volume trading during the third quarter. Some of the largest apartment transactions during the third quarter include John Hancock
Real Estate’s purchase of the Harborview at the Navy Yard in Charlestown for $149 MM, Equity Residential’s acquisition of the Girard in the South End for $116 MM and the Carlyle Group’s sale of Olmstead Place in Jamaica Plain for $103 MM.
Moreover, interest in industrial assets is on the rise due in part to growing e-commerce activity. Jumbo Capital and Boston Andes Capital recently acquired the two-building Rivertech portfolio in Billerica for $45MM or $157/SF, Calare Properties sold a flex building on Seyon Street in Watertown for $15MM or $159/SF and in one of the biggest deals of the year, R.J. Kelly bought the 7-building Cherry Hill Corporate Center in Danvers for $52.8MM or $101/SF.
A handful of assets and redevelopment sites in “fringe” urban locations have changed hands recently. Nordblom Company and Rubenstein Partners acquired an office building and parking garage at 1000 Washington Street in the South End for $75MM. Nordblom also recently snapped up the Boston Globe’s former headquarters in Dorchester, with plans to redevelop the site. Finally, National Development and Charles River Realty Investors purchased 960 Massachusetts Avenue and 100 Newmarket Street in Boston for $11.7MM. While it’s unclear if the new owners are planning to develop the site, it is zoned for multiple uses with the potential for 240,000 SF of commercial space.
2017Q3
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 11
OFFICE SALES
RETAIL SALES
MULTIFAMILY SALES
INDUSTRIAL SALES
CAPITAL MARKETS STATISTICS
Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL
SALES VOLUME ($) $1,449,433,520 $2,291,555,352 $2,846,769,858 $514,786,751 $7,102,545,481
# OF TRANSACTIONS 103 79 92 51 325
TOTAL SF 4,685,421 6,020,434 7,584,382 2,032,274 20,322,511
MEDIAN $/SF $183 $139 $178 $153 $163
Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL
SALES VOLUME ($) $570,941,032 $376,606,283 $285,126,128 $213,154,478 $1,445,827,921
# OF TRANSACTIONS 147 113 136 72 468
TOTAL SF 2,995,240 1,516,673 2,063,810 854,599 7,430,322
MEDIAN $/SF $200 $200 $250 $253 $216
Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL
SALES VOLUME ($) $1,087,102,971 $292,564,788 $770,304,889 $1,472,169,684 $3,622,142,332
# OF TRANSACTIONS 101 76 62 69 308
TOTAL UNITS 4,195 918 2,906 3,332 11,351
MEDIAN $/UNIT $166,667 $241,667 $200,000 $214,062 $200,000
Q4 2016 Q1 2017 Q2 2017 Q3 2017 TOTAL
SALES VOLUME ($) $688,364,820 $452,274,723 $386,332,081 $302,111,353 $1,829,082,977
# OF TRANSACTIONS 122 76 79 69 346
TOTAL SF 6,101,446 4,729,518 6,420,637 3,248,230 20,499,831
MEDIAN $/SF $79 $86 $90 $97 $87
Committed to Boston, Connected to the World.12
M E T R O B O S T O N
OFFICE STATISTICS
MARKET RECAP20
17Q3
TOTAL INVENTORY
(SF)
UNDER CONSTRUCTION
(SF)
DIRECT VACANT
(SF)
SUBLEASE VACANT
(SF)
TOTAL VACANCY
RATE
Q3 NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT ($/SF)
Back Bay 13,836,220 - 1,347,235 240,775 11.5% 31,673 3,126 $64.18
Charlestown 2,490,975 - 136,554 - 5.5% (51,570) (53,701) $41.20
Fenway/Kenmore 1,697,521 - 42,397 - 2.5% 371 13,422 $44.56
Financial District 35,583,994 381,283 2,765,687 236,472 8.4% 65,669 (30,675) $57.18
Midtown 2,076,364 - 69,725 - 3.4% (12,937) 8,059 $45.43
North Station 2,669,250 179,984 114,184 8,808 4.6% 5,146 (16,295) $44.34
Seaport 10,044,887 1,297,341 789,763 70,269 8.6% (15,995) (116,570) $54.77
South Station 1,174,568 - 28,505 - 2.4% (10,893) (18,814) $47.44
BOSTON TOTAL 69,573,779 1,858,608 5,294,050 556,324 8.4% 11,464 (211,448) $57.61
East Cambridge 5,636,548 879,598 68,960 180,246 4.4% (39,931) (149,847) $79.47
Mid Cambridge 2,667,518 - 81,310 23,144 3.9% 13,690 (12,014) $69.72
West Cambridge 2,050,570 - 73,827 23,741 4.8% 11,050 (12,802) $47.79
CAMBRIDGE TOTAL 10,354,636 879,598 224,097 227,131 4.4% (15,191) (174,663) $65.49
Framingham-Natick 4,607,042 - 685,628 61,678 16.2% 145 22,393 $24.60
Inner Suburbs 6,409,455 53,271 500,755 22,353 8.2% 21,227 26,517 $32.98
Route 128 North 14,248,204 145,000 1,334,914 80,832 9.9% 7,213 (38,835) $22.14
Route 128 Northwest 13,574,687 280,000 1,733,254 200,690 14.2% 47,767 (29,423) $30.98
Route 128 South 14,333,096 65,400 1,571,666 185,003 12.3% 12,187 (81,069) $23.09
Route 128 West 23,447,964 541,100 2,548,175 279,622 12.1% 283,291 448,104 $38.42
ROUTE 128 TOTAL 65,603,951 1,031,500 7,188,009 746,147 12.1% 350,458 298,777 $30.25
Route 495 North 13,208,246 - 2,759,695 111,451 21.7% (61,205) (31,418) $18.89
Route 495 Northeast 7,453,186 - 1,495,408 12,331 20.2% (11,145) 75,948 $18.52
Route 495 South 3,334,696 - 527,577 7,935 16.1% (131,165) (82,673) $20.05
Route 495 West 10,977,563 45,000 1,687,279 39,668 15.7% 90,882 372,219 $19.08
ROUTE 495 TOTAL 34,973,691 45,000 6,469,959 171,385 19.0% (112,633) 334,076 $18.95
SUBURBAN TOTAL 111,594,139 1,129,771 14,844,351 1,001,563 14.2% 259,197 681,763 $25.16
MARKET TOTAL 191,522,554 3,867,977 20,362,498 1,785,018 11.6% 255,470 295,652 $34.04
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 13
M E T R O B O S T O N M E T R O B O S T O N
INDUSTRIAL STATISTICS
MARKET RECAPBOSTON
10TH LARGESTMETROPOLITAN AREA IN THE US
UNEMPLOYMENT RATE US AVERAGE: 4.4%
2,748,756 LABOR FORCE
3.5%
$2.7 BILLION VC Funding (2016) 9
Accelerators
Tech Startups (Compass)4,000
537 Big Data Companies in MA INNOVATIVE
CITY(Innovation Cities)
SMARTEST
CITY(Forbes)
16LIFE SCIENCE INCUBATORS
TOTAL INVENTORY
(SF)
UNDER CONSTRUCTION
(SF)
DIRECT VACANT
(SF)
SUBLEASE VACANT
(SF)
TOTAL VACANCY
RATE
Q3 NET
ABSORPTION (SF)
YTD NET
ABSORPTION (SF)
ASKING RENT NNN
($/SF)
Urban Core 17,429,405 70,000 907,012 32,214 5.4% (261,732) (82,522) $10.37
Framingham-Natick 3,163,774 - 129,016 10,000 4.4% 106,421 168,927 $8.60
Route 128 North 28,364,865 145,000 1,138,366 123,173 4.4% 56,452 242,233 $9.84
Route 128 Northwest 3,881,764 - 193,202 92,500 7.4% (60,177) (4,063) $19.38
Route 128 South 39,059,962 400,000 3,070,924 5,100 7.9% 164,125 98,675 $7.24
Route 128 West 4,319,350 - 195,414 30,975 5.2% 1,983 (577) $18.58
ROUTE 128 TOTAL 75,625,941 545,000 4,597,906 251,748 6.4% 162,383 336,268 $8.87
Route 495 North 20,546,056 383,000 2,533,080 13,605 12.4% (265,721) (245,298) $10.17
Route 495 Northeast 11,905,357 175,000 1,036,588 57,600 9.2% 402,479 435,929 $8.17
Route 495 South 31,060,160 575,500 2,697,490 - 8.7% 39,284 122,993 $6.04
Route 495 West 15,184,522 - 723,269 - 4.8% 74,547 133,803 $9.49
ROUTE 495 TOTAL 78,696,095 1,133,500 6,990,427 71,205 9.0% 250,589 447,427 $8.21
MARKET TOTAL 174,915,215 1,748,500 12,624,361 365,167 7.4% 257,661 870,100 $8.61
Committed to Boston, Connected to the World.14
M E T R O B O S T O N
2017Q3 CONTACTS
PETER W. EVANS
617.457.3402
JASON ROTH
617.457.3405
COLIN GORDON
617.457.3265
MAX PAWK
617.457.3345
MATTHEW DAVIS
617.457.3305
TREY AGNEW
Executive Vice President
617.457.3363
CATHY MINNERLY
Executive Vice President
617.457.3334
JAMES BOUDROT, CCIM, SIOR
Executive Vice President
617.457.3328
DAVID GILKIE, CCIM, SIOR
Senior Vice President
617.457.3202
F. MICHAEL DIGIANO
Executive Vice President
617.457.3410
NED HALLORAN
Senior Vice President
617.457.3372
STEVE JAMES
Executive Vice President
617.457.3263
LEEANNE RIZZO
Senior Vice President
617.457.3371
OVAR OSVOLD
Vice President
617.457.3222
CORMAC SULLIVAN
Associate
617.457.3319
MICHAEL ALLEN
Assistant Vice President
617.457.3276
SEAN HANNIGAN
Associate
617.457.3252
PATRICK GRADY
Associate
617.457.3278
DAVID N. ROSS
Executive Vice President
617.457.3392
ANDREW KAEYER
Executive Vice President
617.457.3207
ELLIOTT WHITE
Assistant Vice President
617.457.3355
CARL CHRISTIE
Executive Vice President
617.457.3394
DAN MCGEE
Assistant Vice President
617.457.3266
IAN S. MCKINLEY
Senior Associate
617.457.3404
ROBERT TITO
Executive Vice President
617.457.3231
GINA BARROSO
Assistant Vice President
617.457.3261
MARK HALL
Executive Vice President
617.457.3412
HENRY LIEBER
Assistant Vice President
617.457.3383
STUART PRATT, SIOR, CCIM
Chairman
617.457.3333
DAVID E. FINNEGAN
Vice President, Marketing Services
617.457.3238
STEPHEN M. PROZINSKI
COO & Co-Managing Principal
617.457.3370
LIZ BERTHELETTE
Director of Research
617.457.3306
PETER W. EVANS
Executive Vice President &
617.457.3402
Corporate
Urban Advisory
Group
Suburban Leasing &
Sales
Capital Markets
Co-Managing Principal
303 Congress Street Boston, MA 617.457.3400 www.naihunneman.com 15
SUBMARKET MAPM E T R O B O S T O N M E T R O B O S T O N
BOSTON
CAMBRIDGE
INNER SUBURBS
128 NORTH
128 NORTHWEST
128 WEST
FRAMINGHAM-NATICK
128 SOUTH
495 NORTHEAST
495 NORTH
495 WEST
495 SOUTH
303 Congress Street | Boston, MA 02210 | 617.457.3400
www.NAIHunneman.com
MARKET REPORTM E T R O B O S T O N
Q3 2017
OFFICE (DOWNTOWN, CAMBRIDGE, SUBURBAN)
INDUSTRIAL (WAREHOUSE, FLEX/R&D, MANUFACTURING)
CAPITAL MARKETS
METHODOLOGY
SOURCE: Co-Star, NAI Hunneman Commercial Company. PREPARED: September 2017. DISCLAIMER: The above data is from sources deemed to be generally reliable, but no warranty is made as to the accuracy of the data nor its usefulness for any particular purpose. Average Rental Rates are asking rents on direct space. Vacant space includes both direct and sublease space.