Boston_SNH_YearEnd2001

M A R K E T B E A T S E R I E SG R E A T E R B O S T O N , M A

S O U T H E R N N E W H A M P S H I R E

YEAR-END 2001

Cushman & Wakefield, Greater Boston, MA/Southern New Hampshire Year-End 2001 Page 1

Greater Boston, MA/Southern New Hampshire MarketBeat Series $175.00Report prepared by Cushman & Wakefield, Inc. January 2002 • Copyright © 2002 Cushman & Wakefield, Inc. All rights reserved.The data compiled in the Greater Boston, MA/Southern New Hampshire MarketBeat Series is the legal property of Cushman & Wakefield, Inc. Reproduction or dissemination ofthe information contained herein is strictly prohibited without the expressed written consent of Cushman & Wakefield, Inc.This report contains information, including informationavailable to the public, which has been relied upon by Cushman & Wakefield, Inc. on the assumption that it is accurate and complete without independent verification by Cushman& Wakefield, Inc. Cushman & Wakefield, Inc. accepts no responsibility if this should prove to be inaccurate or incomplete. No warranty or representation, express or implied, ismade by Cushman & Wakefield, Inc. as to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, and changes inmarket conditions.

Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Office Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Office Submarket Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Office Market Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Office Market Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Investment Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Retail Valuation Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Industrial Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Industrial Submarket Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Industrial Market Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Industrial Market Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

U.S. Commercial Real Estate Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Glossary/Major Market Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Cushman & Wakefield International Offices . . . . . . . . . . . . . . . . . . . . . . . B/C

TABLE OF CONTENTS

Cushman & Wakefield of Massachusetts, Inc.125 Summer Street, Suite 1500 • Boston, MA 02110 • 617-330-6966

Robert E. Griffin, Jr. • President–New England Area

Thomas L. Collins • Senior Managing Director,Vice President–New England Area

Bonnie M. Roberts • Research Associate

Bruce E. MoslerPresident, U.S. Operations

Maria T. SicolaSenior Managing Director,

Research

RESEARCHCushman & Wakefield offers diverse products and services including market and submarketstudies, investment research, demographic and economic trend analyses and real estateforecasts. The award-winning MarketBeat Series profiles real estate conditions in 47 strategic markets throughout the United States. For more information on Cushman & Wakefield and ourother publications, refer to our website. http://www.cushmanwakefield.com

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2001 Ace Award Winner

I-495 WestI-495 SouthNashuaBedfordManchesterConcordPortsmouth

Northwest CorridorNorth ShoreI-495 WestMetroWest128 West

I-495 SouthWorcester128 SouthRoute 3 SouthFall River/New Bedford

greater boston, ma/so. new hampshire area map

OFFICE SUBMARKETS INDUSTRIAL SUBMARKETS

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Central Business DistrictCambridgeInner Suburbs128 North128 West128 SouthMetroWestI-495 North

Page 2 Cushman & Wakefield, Greater Boston, MA/Southern New Hampshire Year-End 2001

MARKETBEAT

© 2002 Microsoft; © 2002 GDT, Inc.

office market overview


MARKETBEAT

The Greater Boston economy followed thenation into recession during the last half of 2001.As the high technology, manufacturing andtourism industries continued to contract andretrenchment in the finance, insurance and realestate (F.I.R.E.) sectors led to further job losses,economic growth and productivity weakenedand consumer confidence fell sharply.

The decline represents a significant adjustmentphase for the Greater Boston economy, whichgrew at historic and unsustainable levels duringthe last several years. The Commonwealth’sNovember unemployment rate was 4.3 percent,an increase of nearly two percentage pointsover the prior year’s healthy 2.5 percent. Despitethis rise, Massachusetts unemployment contin-ues to best the nation’s 5.7 percent average.

Venture capital spending has dropped notably from third quarter 2000 levels, with biotechnol-ogy a notable exception. However, according toPricewaterhouseCoopers Money Tree Survey,funding levels appear to be returning to more of an historical norm.

Paralleling the nationwide trend, investment inequipment and software in Greater Boston con-tinued to shrink during the last two quarters,and tenants have returned large amounts of sublease space to the market. However, eco-nomic indicators suggest stabilization and per-haps even some upward momentum at year-end.With low inventories of durable goods, particu-larly in business equipment, any appreciableincreases in demand will require production,bolstering the Commonwealth’s troubled manu-facturing sector and related technological goodsand services sectors.

Greater Boston’s defense and biotechnology sec-tors continue to show positive growth and signsof future expansion. The defense industry, fundedsubstantially by the federal government for currentmilitary, security and defense-related requirements,has a strong foundation in the Commonwealth.

Biotechnology companies, in particular, attractedby the many prestigious educational institutionsproviding intellectual capital to the area, continueto locate in Greater Boston in record numbers.Driven by military and defense spending, scien-tific and commercial advances relating to map-ping of the human genome, and pharmaceuticalinnovations, these sectors are performingstrongly and are emerging as future opportuni-ties for economic expansion in the Bay State.

CENTRAL BUSINESS DISTRICTBoston’s Central Business District (CBD) provedits resiliency throughout 2001’s rocky economicclimate. Although absorption was negative forthe first time since 1991, the CBD posted anoverall vacancy rate of 12.1 percent, despiteweathering an astonishing 568 percent one-yearincrease in availabilities.

Entering 2001, overall vacancy in Boston’s CBDwas an extremely tight 2.2 percent, with class A rents among the highest in the country at$57.86 per square foot (psf). As the economysoftened and tenants began to return subleasespace to the market, overall vacancies spiked to7.4 percent at mid-year and 11.1 percent in thethird quarter. Inventory increased 3.1 percentover the year to 55.0 million square feet (msf),as 1.7 msf of new construction was delivered.Despite this, overall vacancy rose only one per-centage point in the fourth quarter.

Boston’s CBD sublease availabilities mirrored eco-nomic trends.Tenants returning sublease space inthe CBD have not been limited to high technol-ogy or dot.com firms, as has been the case inmany non-CBD markets. Blue-chip tenants suchas Fidelity (400,000 sf in two downtown towers)and State Street (250,000 sf at One LincolnStreet, still under construction) have returnedlarge blocks of sublease space.

Greater Boston’s defense and

biotechnology sectors continue

to show positive growth and

signs of future expansion.

CBD net absorption

was negative for the first time

since 1991, and the CBD

posted an overall vacancy rate

of 12.1 percent.

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office market overviewMARKETBEAT

While overall CBD rents have fallen only 3 per-cent from year-end 2000 levels to $47.49 psf,tenants are using the soft demand climate toexercise leverage. Landlord concessions are onthe rise and a widening gap is developingbetween direct asking and sublease rental rates.In the third and fourth quarters, several promi-nent firms seeking to sublease space heavily dis-counted their asking prices in order to disposeof the excess inventory. However, the higher riskand shorter lease terms involved in subleasestypically reduce the effective competitivenessagainst direct availabilities and generally have lim-ited impact on direct asking class A rents.

With an additional 2.4 msf currently under construction, increasing the size of the CBD by almost 4.5 percent by 2003, vacancy ratesmay well rise to the levels of the early ’90s,approaching 16 percent by year-end. Rents willfall accordingly, but not uniformly, with the land-lord-tenant and direct/sublease gap between ask-ing rates producing more volatility in ranges.

NON-CBDFollowing four consecutive years of tighteningoccupancies, the non-CBD overall vacancy ratespiked 14.8 percentage points since year-end2000 to reach 20.6 percent at year-end 2001.Much of this increase is attributed to the grow-ing number of firms marketing sublease space,which has increased from 1.39 msf to 7.71 msfin the past year.

Nearly 70 percent of these subleases are con-centrated in the northern and western marketsof 128 North/West and I-495 North/West,which are heavy in high-technology industrypopulation. With a larger percentage of industrypopulation in more stable high technology infras-tructure, such as data storage, networking, PCsand related suppliers, the I-495 South marketwas somewhat spared from the wave of subleasespace. The 128 South market also had limitedexposure, given its location as a distributionhub and its substantial industrial inventory.

Despite the increase in available space, the non-CBD experienced significant leasing activity todate. The biotechnology sector remained espe-cially active with a new 402,508-sf lease byMillennium Pharmaceuticals at University Parkat MIT in the Kendall Square/East Cambridgesubmarket. Other significant leases were com-pleted in the 128 West and South markets,

including Exodus Communications’ lease of330,000 sf at 175 Wyman Street in Waltham andState Street’s lease of 235,000 sf at 1200 CrownColony Drive. In 495 West, Sepracor’s lease of440,000 sf in Solomon Pond Corporate Centerwas the largest non-CBD lease transaction ofthe year, and while EMC leased 196,000 at 900West Park Drive, it is already seeking to returnsublease space to the market.

Sales activity in the non-CBD was strong, espe-cially in the Cambridge submarket, where severallandmark properties changed hands. Among thelargest transactions of the year were the salesof Technology Square (1.2 msf) to MIT for $278million, the 750,000-sf Arsenal on the Charlesto Harvard Business School for $162 million andPolaroid’s 578,000-sf building at 850-920 WinterStreet to the Davis Companies/ Prudential for$69 million.

The current construction pipeline is muchsmaller than in recent years. With 4.8 msf deliv-ered last year, another 3.4 msf is remaining underconstruction, almost all of which will be deliveredin 2002. With 55 percent preleased, absorptionof the new space is well underway.

As the non-CBD begins to absorb the largerecent inventory additions, asking rents areexpected to continue to decline through thefirst two quarters of 2002, with constructiondeliveries causing the overall vacancy toapproach 22 percent by the beginning of 2003.

SOUTHERN NEW HAMPSHIRENew Hampshire’s economic downturn occurredmore slowly than that of the nation and the rest of the New England region. Employmentgrowth remained positive, but deceleratedmarkedly as high-technology, contract manufac-

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While overall CBD rents

have fallen only three percent

from year-end 2000 levels to

$47.49 psf, tenants are using

the soft demand climate

to exercise leverage.

Nearly 70 percent of sublease

space is concentrated in the

northern and western markets

of 128 North/West and

I-495 North/West, which are

heavy in high-technology

industry population.


office market overviewMARKETBEAT

turing and financial services sectors shed jobs.Rising through the second half of the year, theunemployment rate dropped to 3.7 percent inDecember and remains well below the 5.7posted nationally.

While several manufacturing firms, particularlythose involved in electronic and electrical equip-ment and telecommunications, refrained fromfurther expansion, closed plants or announcedlayoffs, the number of employers in the stateincreased at nearly the same pace as last year.Although companies such as those supplyingcomponents to the electronics, automotive andaircraft industries may continue to shrink andcut costs while demand remains soft, many ofNew Hampshire’s manufacturing firms will bene-fit from the government’s new focus and spendingon defense, staving off further economic weak-ness by ensuring employment. BAE Systems,the state’s largest employer, recently purchasedSanders, a division of Lockheed Martin whichdevelops electronics and system technologiesused in the military, and will receive about $7billion of the defense department’s jet fightercontract award.

The Seacoast is home to New Hampshire’s“E-Coast”, a wide corridor of high-tech andnew economy businesses stretching fromMassachusetts and into Maine and western NewHampshire which draw from the region’s highly-skilled labor force. Many of these companies arelocating at the Pease International Tradeport, ahotbed of new construction with nearly 1.0 msfunderway and a total of 3.8 msf, expected tohouse 9,000 to 10,000 jobs by completion.

Contributing to New Hampshire’s diverse indus-trial blend of trade, manufacturing and invest-ment is the state’s large tourism industry, whichshifted dramatically to motorist-based visits afterSeptember 11th. However, Manchester Airportassumed a record-breaking amount of spill-overair traffic from Boston’s Logan Airport.

While many other New England suburban mar-kets experienced extraordinary increases in sub-lease space in 2001, widely attributed to high-tech“over-leasing” during the boom of the late ’90s,New Hampshire’s office markets responded moreconservatively. With less impact from over-leasingby dot.com firms and heavy developmentemphasis on high-tech and flex space, much ofwhich is considered industrial space, class Aoffice inventory remains low. Overall vacancyspiked in mid-year, but rose only slightly lessthan five percentage points over the year to 11.3

percent, leaving direct vacancies at a healthy 8.1percent at year-end. Rents of $17.94 psf in 2000fell only slightly to $17.70 psf by year-end 2001, adecline of only 1.4 percent; however, the discrep-ancy between asking rents and effective rents hasbeen widening, particularly along the I-93 corridor.

While construction deliveries have been healthy,New Hampshire’s inventory has not been floodedand absorption has been positive in most submar-kets.With the exception of Pease InternationalTradeport, where an unprecedented 1.0 msf is invarious stages of construction (much of it pre-leased), several projects under construction andmany permitted and/or proposed projects havebeen halted until more favorable market condi-tions and users present themselves.

With its broadly diversified economy, attractivetax environment, close proximity to major trans-portation hubs and large labor pool of highlyskilled workers, New Hampshire is well poisedto emerge more rapidly from the nation’s down-turn than most other New England markets. Asa result of this year’s cutbacks, inventories andproduction capacities are low, and will requireincreased production as the region emergesfrom downturn, bolstering employment. Flatresults are expected from all sectors during the first half of the year. This will be followed by growth which will begin in the third quarter,but occur more slowly than the frenzied pace of the ’90s, and will begin to impact and raisedepressed prices by the end of the year.

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Southern New HampshireOverall Rental Rates vs. Vacancy Rates

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New Hampshire’s employment

growth remained positive,

but decelerated markedly

as high-technology, contract

manufacturing and financial

services sectors shed jobs.

While construction deliveries

have been healthy, New

Hampshire’s inventory has

not been flooded and

absorption has been positive

in most submarkets.


CAMBRIDGE■ The biotechnology sector is the current driver of the

Cambridge market, with several major companies acquiringnew or expansion space. Cambridge now rivals NorthernCalifornia for the greatest concentration of biotechnologycompanies nationally.

■ Nearly 1.4 msf of new construction was delivered during 2001,with another 1.9 msf scheduled for delivery before 2003, rep-resenting a 23 percent total increase to the market’s inventory.

■ Lincoln Property and J.E. Roberts purchased the 644,077-sfOne Kendall Square complex from Beacon Capital Partners for $192 million, or $289 psf.

■ Paradigm Properties purchased the 65,942-sf property at 1030 Massachusetts Avenue from Westbrook Partners for$17.0 million ($258 psf).

INNER SUBURBS■ Harvard University purchased the 753,992-sf Arsenal on the

Charles property in Watertown from O’Neill Properties andPrudential Real Estate Investors for $162.6 million ($216 psf).

■ The Bulfinch Companies purchased 125 Walnut Street(132,397 sf) in Watertown. It will be redeveloped as theWatertown Technology Center.

■ AT&T completed a 201,000 sf build-to-suit project for a webhosting facility at 480 Arsenal Street in the WatertownBusiness Center.

■ Arthur D. Little has put most of the 366,000-sf building 311at the Arsenal on the Charles back on the sublease market.

128 NORTH■ In Burlington’s largest lease of the year, Intergen subleased

65,000 sf of Nokia’s 135,000 sf at 15 Wayside Road.

■ New Boston Fund purchased Five Burlington Woods Drivefrom Lend Lease for $17.9 million ($174 psf).

■ Everest Partners LLC purchased 99 and 199 Rosewood Drivein Danvers from Cornerstone Realty for $14.7 million ($85 psf).

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CambridgeOverall Market Trends

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Inner SuburbsOverall Market Trends


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128 NorthOverall Market Trends


office submarket reviewMARKETBEAT


128 WEST■ Key 3 Media leased 98,000 sf at 117 Kendrick Street in

Needham.

■ Teachers Insurance & Annuity Association purchased 160Gould Street in Needham for $28.1 million (>$200 psf).At the time of the sale, the building was 96 percent leased.

■ Boston Properties completed construction of Waltham WestonCorporate Center, a 300,000-sf building off Route 117 inWaltham. Microsoft was the lead tenant, taking 60,000 sf.

128 SOUTH■ State Street Bank has placed the entire 235,000-sf at 1200 Crown

Colony Drive in Quincy on the sublease market.

■ The Shaw Group expanded their presence in Massachusettsby agreeing to lease 55,000 sf at 600 Technology Drive inStoughton.

■ The Grossman Companies purchased 100 and 150 GrossmanDrive at Braintree Executive Park for $19.7 million ($185 psf).

■ National Development purchased three buildings totaling147,000 sf at Norwood Park South for $12.8 million.

METROWEST■ The Connected Corporation subleased 78,000 sf from Staples

at 100 Pennsylvania Avenue in Framingham.

■ Genzyme has cancelled plans for the construction of a260,000-sf recombinant protein plant in Framingham, havingacquired a similar plant in Belgium.

■ California State Teachers Retirement purchased 100 StaplesDrive in Framingham from National Development for $32.25million ($208 psf).

■ Long-time tenants in the market include Staples, Bose,International Data Corporation, TJX Companies and Genzyme.

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128 WestOverall Market Trends


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128 SouthOverall Market Trends


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MetroWestOverall Market Trends




I-495 NORTH■ The I-495 submarket ended the year with over 500,000 sf

of sublease space, which spiked overall vacancy rates to 18.5 percent from 4.3 percent a year ago.

■ Converse leased 65,000 sf at One High Street in NorthAndover.

■ Genetics Institute leased 53,000 sf at 181 Ballardvale Street in Wilmington.

I-495 WEST■ Axiowave Networks leased 78,000 sf of direct space at

200 Nickerson Road in Marlborough.

■ In Westborough, EMC Corporation leased 78,000 sf at OneResearch Drive and 196,000 sf at 900 West Park Drive.

■ Berkeley Investments purchased the 282,000-sf One ResearchDrive in Westborough from the Government of SingaporeInvestment Corporation for $42.5 million ($150 psf).

■ Significant tenants in the market include Sepracor, theTJX Companies, 3Com, and EMC Corporation.

I-495 SOUTH■ Telco Systems relocated its headquarters from Norwood

into 44,000 sf at Two Hampshire Road in Foxborough.

■ Guardian leased 51,000 sf at One Lakeshore Drive in theLakeshore Center in Bridgewater.

■ Two Hampshire Road in Cabot Business Park was completedin Foxborough. Constructed on speculation, 58 percent of its116,000 is leased.

■ Franklin Equity Partners, LLC purchased the 111,061-sf prop-erty at 124 Grove Street in Franklin Oaks Office Park for$12.6 million ($113 psf).

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I-495 NorthOverall Market Trends


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I-495 WestOverall Market Trends


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I-495 SouthOverall Market Trends




office market highlightsMARKETBEAT

Square BuildingBuilding Submarket Tenant Feet Class

One Lincoln Street South Station/Fort Point Channel State Street Corporation 1,000,000 ASolomon Pond Corporate Center I-495 West/Worcester Sepracor 440,000 AUniversity Park at MIT Kendall Square/East Cambridge Millennium Pharmaceuticals 402,508 A60 State Street Financial District Pioneer 200,000 A

SIGNIFICANT 2001 NEW LEASE TRANSACTIONS

Square Price PurchaseBuilding Submarket Buyer Feet per SF Price

One Federal Street Financial District Jamestown Advisors 1,120,722 $334.96 $375,400,000Technology Square Cambridge MIT 1,214,161 $229.61 $278,785,41275–101 Federal Street Financial District Equity Office Properties Trust 811,054 $271.25 $105,600,000The Arsenal on the Charles Cambridge Harvard Business School 753,992 $215.71 $162,641,89999 High Street Financial District Walton Street/Westbrook 731,204 $291.98 $213,500,000Polaroid/850-920 Winter Street Cambridge Davis Companies/Prudential 527,000 $128.96 $69,250,000125 and 150 CambridgePark Drive Cambridge J.P. Morgan Fleming 436,100 $224.72 $98,000,000

SIGNIFICANT 2001 SALE TRANSACTIONS

Square Percent CompletionBuilding Submarket Major Tenant Feet Vacant Date

225–235 Presidential Way 128 North GTE Internetworking 435,000 0% Sep-01111 Huntington Avenue Back Bay Palmer & Dodge 187,232 8% Sep-0110 St. James Avenue Back Bay Holland & Knight 156,000 6% Feb-01Waltham Weston Corporate Center 128 West Microsoft 51,740 85% Nov-01

SIGNIFICANT 2001 CONSTRUCTION COMPLETIONS

Square Percent CompletionBuilding Submarket Major Tenant Feet Vacant Date

One Lincoln Street South Station/Fort Point Channel State Street Corporation 1,000,000 0% Sep-0333 Arch Street Financial District N/A 600,000 100% Jan-04World Trade Center (West) South Station/Fort Point Channel Foley Hoag & Eliot 472,362 16% Jun-02Park Central I-495 West/Worcester N/A 400,000 100% Dec-02131 Dartmouth Street Back Bay N/A 369,172 100% Jun-02

SIGNIFICANT PROJECTS UNDER CONSTRUCTION

Available Building PosessionBuilding Submarket Direct/Sublease Square Feet Class Date

33 Arch Street Financial District Direct 600,000 A Jan-04254 Massachusetts Avenue Kendall Square/East Cambridge Direct 504,082 A Jan-0255 Fairbanks Boulevard I-495 West/Worcester Direct 500,000 A Immediate377 Court Street I-495 South Direct 255,000 B ImmediateWaltham Weston Corporate Center 128 West Direct 250,307 A Immediate131 Dartmouth Street Back Bay Direct 369,172 A Jun-02

SIGNIFICANT LEASE AVAILABILITIES


office market statisticsMARKETBEAT

Overall Direct YTD YTD YTD Direct Wtd.No. of Vacancy Vacancy Leasing Under Construction Net Avg. Class A

Market/Submarket Inventory Bldgs. Rate Rate Activity Construction Completions Absorption *Rental Rate*

Financial District 28,524,416 132 11.0% 5.9% 1,287,781 600,000 0 (1,108,226) $58.54

Government Center/North Station 3,260,323 40 8.9% 7.3% 138,215 0 0 (132,743) $46.68

Midtown 1,604,143 21 6.4% 6.1% 31,521 0 0 (49,689) N/A

Back Bay 12,666,506 66 11.3% 6.6% 1,082,768 369,172 1,484,244 869,135 $55.39

South Station/Fort Point Channel 6,907,222 53 19.2% 13.6% 1,553,306 1,472,362 131,441 (72,535) $51.43

Charlestown 2,024,177 18 17.3% 13.6% 53,200 0 108,000 (25,085) $29.50

CBD Total 54,986,787 330 12.1% 7.4% 4,146,791 2,441,534 1,723,685 (519,143) $54.42

Alewife/Fresh Pond 1,942,539 17 14.4% 9.3% 188,984 0 200,000 86,472 $39.04

Massachusetts Ave./Harvard Square 2,090,186 32 9.1% 7.7% 118,794 0 66,132 (90,668) $46.25

Kendall Square/East Cambridge 10,090,148 71 19.6% 11.2% 1,317,759 1,898,000 1,101,575 (141,742) $51.90

Cambridge Total 14,122,873 120 17.4% 10.4% 1,625,537 1,898,000 1,367,707 (145,938) $51.17

Somerville/Medford/Malden 1,795,361 15 29.9% 25.7% 159,358 0 192,000 (116,589) $30.61

Allston/Brighton/Watertown 2,320,594 23 31.5% 12.3% 181,088 0 181,982 16,882 $36.73

Inner Suburbs Total 4,115,955 38 30.8% 18.2% 340,446 0 373,982 (99,707) $32.75

128 North 14,556,837 164 22.1% 12.0% 1,625,013 348,000 1,007,283 25,798 $30.00

128 West 20,886,025 259 20.0% 10.7% 1,892,097 0 587,066 (701,798) $36.41

128 South 11,170,252 135 16.1% 11.4% 1,338,807 499,950 452,500 97,638 $29.16

MetroWest 5,086,771 57 11.9% 5.8% 477,590 0 125,000 (6,756) $31.54

I-495 North 5,419,435 44 18.5% 9.1% 497,914 108,000 83,521 (56,869) $26.32

I-495 West 9,311,375 97 30.3% 15.0% 1,740,571 540,000 756,080 (144,101) $24.02

I-495 South 2,021,809 39 23.3% 22.0% 88,467 0 116,000 (124,898) $22.04

Suburban Total 68,452,504 795 20.6% 11.5% 7,660,459 1,495,950 3,127,450 (910,986) $30.21

Non-CBD Total 86,691,332 953 20.6% 11.5% 9,626,442 3,393,950 4,869,139 (1,156,631) $33.36

Greater Boston Total 141,678,119 1,283 17.3% 10.0% 13,773,233 5,835,484 6,592,824 (1,675,774) $39.18

*Rental rates reflect $psf/year

Overall Direct YTD YTD YTD Direct Wtd.No. of Vacancy Vacancy Leasing Under Construction Net Avg. Class A

Market/Submarket Inventory Bldgs. Rate Rate Activity Construction Completions Absorption *Rental Rate*

Nashua 1,454,976 31 12.7% 6.5% 52,508 100,000 0 (34,312) $21.63

Manchester 1,788,094 15 4.7% 4.1% 144,351 20,000 0 50,942 $17.84

Bedford 1,017,769 22 18.7% 9.5% 36,836 0 0 52,660 $18.63

Portsmouth 1,431,017 22 6.9% 5.8% 187,000 0 109,066 36,295 $18.89

Concord 828,234 18 21.8% 21.8% 1,708 0 0 (154,768) $14.70

Southern New Hampshire 6,520,090 108 11.3% 8.1% 422,403 120,000 109,066 (49,183) $17.78

*Rental rates reflect $psf/year


investment market overviewMARKETBEAT

2001 INVESTMENT YEARIN REVIEWBoston’s investment sales market continued toachieve the previous year’s record levels duringthe first half of the year. However, the third andfourth quarters exemplified market conditionsparallel to other segments of the real estateindustry, as well as those of the national economy.Abundant sublease space, softening rents and in-creased vacancy rates combined to put the brakeson transaction volume, as buyers and sellersseemed unable to bridge a widening bid-ask gap.

The sharp drop-off in deal velocity is evident inthe review of Boston top 25 sales in 2001. Thetotal dollar volume of these large cap sales wasjust over $2.0 billion, barely above 1997 levels,and down 35 percent from the 2000 peak of$3.1 billion. 15 of the top 25 transactions occurredduring the first half of 2001 and accounted for astaggering 78 percent of dollar volume. The aver-age sale price of these transactions was just over$80.5 million, down 36 percent from the 2000average of $126.0 million. Average prices duringthe first half of the year were $104.7 million,versus $44.5 million in the second half. Medianprices fell to $44.7 million from the 2000 peakof $78.0 million. The top 25 sales ranged in pricefrom $28.0 million to $375.0 million.

Many sellers continue to sit on the sidelines withno pressure to sell, hoping to wait out depressedpricing levels. A number of properties have beentaken off the market, including 1 and 2 LincolnPlaza in Boston, the Lotus Building in Cambridge,University Office Park in Waltham and HaydenWoods in Lexington.With interest rates at historiclows, refinancing is an attractive option for owners.The prevalence of sublease space, rather than directvacancies, has also helped keep landlords afloat.

From the buyers’ perspective, the lack of leasingvelocity makes it difficult to peg market rents,

resulting in increased conservatism for futurerent growth. Underwriting has shifted in focusfrom exit strategy to asset preservation, as in-vestors adjust their yield expectations downward.

While a strong number of deal registrations con-tinues to evidence an unprecedented amount ofavailable investment capital, resulting quality offershave been on the decline. With bid/ask gaps andre-trades at an all-time high, finalizing deals provedto be a difficult task in the second half of the year.

In the previous two years, a large percentage ofthe top transactions were located in Bostonproper, particularly in high-rise properties. In2001, there were only three such sales and justsix Boston properties were in the top 25. Afterthe Spring sales of both 99 High Street and ahalf interest in 75-101 Federal Street, no BostonCBD tower trades have occurred since the June2001 close of One Federal to Jamestown prop-erties for $375.4 million, or $335 per squarefoot (psf). Since mid-year the only notable salesin Boston have been One Washington Mall for$44.2 million ($286 psf) and Fort Point Place for$29.5 million ($198 psf).

CAMBRIDGEWhile activity in the Cambridge investment marketgenerally paralleled the decline in the high-tech sec-tor in 2001, Cambridge properties comprised over28 percent of the dollar volume of the top 25ranking. Strong activity was led by several large trans-actions to stalwart institutional buyers, including the$278 million sale of Technology Square to MIT andthe $162 million sale of The Arsenal on the Charlesto Harvard Business School Publishing.The year endedwith the closing of 125 & 150 CambridgePark Drivein Cambridge’s Alewife market to J.P. MorganFleming. Evidence of the market’s declining condi-tions was the bid/ask gap between this property’sinitial asking price of $127 million ($291 psf) andthe eventual selling price of $98 million ($225 psf).

Fifteen of Boston’s top 25

transactions occurred during

the first half of 2001 and

accounted for a staggering 78

percent of their dollar volume.

Cambridge properties

comprised over 28 percent of

the dollar volume of the top

25 sales.

H

H

H

HH

H

H

1995 1996 1997 1998 1999 2000 2001$0.00

$25.00

$50.00

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$150.00

0.5

1.0

1.5

2.0

2.5

3.0

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(millions) (billions)Boston Area Sale Transactions

Average Sale Price Median Sale Price H Top 25 Sale Transactions

The Top 25

H

H

H

H H

H

BostonOffice

CambridgeOffice

SuburbanOffice

Other Retail Multi-Family0

3

6

9

12

15

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

The Top 25 by Property Type

Number of Sales H Percent of Total


investment market overviewMARKETBEAT

SUBURBSWhile still out of favor with many investors, thesuburban office market made up a surprisinglylarge portion of the top 25 sales in 2001. Tensuburban properties comprised 28 percent ofthe sales volume in 2001, distributed evenly overthe year. This is primarily reflective of the lack oflarge downtown sales, which kept suburbanoffice out of the top 25 ranking last year.

Investors in the suburbs sought the three “C”s:credit-worthiness, core location and cash flowstability. Pension funds, typically strong in this cat-egory, have been net sellers due to rising real estateallocations in their portfolios. Notable in the sec-ond half was Berkeley Investments’ purchase of bothOne Research Drive in Westborough for $43million ($152 psf) and four buildings in the CabotBusiness Park in Mansfield for $37 million ($91 psf).

MULTI-FAMILYDespite the continued red-hot demand for thisproperty type, few significant multi-family salesoccurred in 2001, due primarily to a lack ofproduct. Two notable sales were the newly con-structed, 240-unit Den Rock Apartments inLawrence, purchased by SSR Realty Advisorsfrom JPI for $27.6 million ($115,000 per unit),and the 252-unit Middlesex Crossing in Billerica,purchased in a portfolio sale from LendLease byRREEF for $30.9 million ($123,000 per unit). Therecent purchase of the 40-unit DavenportApartments in Cambridge by The HamiltonCompany for $11.2 million represents a stagger-ing price of $280,000 per unit. Also significant isthe current offering of the 696- unit Gardencrestin Waltham for $90 million ($129,000 per unit).Softening conditions in the local rental marketare not expected to affect this sector signifi-cantly, as development interest remains strong.

MIDDLE MARKETSFavorable debt had a major impact on the MiddleMarket sector in 2001. Middle Market sales —the majority of which are leveraged — faced stiffcompetition from refinancing. As opposed togenerous amounts of debt available at extremelyattractive rates, asset pricing was often belowacceptable levels. This prompted many ownersto refinance, taking out most, or all, of their ini-tial equity and retaining the cash flows.

Notwithstanding the general impact refinancinghad on sales, several transactions of note occurredduring 2001, evenly distributed throughout thevarious markets. While the majority of theseassets were office properties, there were somemulti-family and grocery-anchored retail projectsas well. Two noteworthy suburban office prop-erty transactions occurred in the last days of2001. The sale of 1030 Massachusetts Avenue inCambridge on behalf of Westbrook Partners toParadigm Properties for $17 million ($258 psf)indicates that well located, stabilized assets canstill demand healthy prices.The sale of NorthwoodsBusiness Park (99 and 199 Rosewood Drive) inDanvers for Cornerstone Real Estate Advisersto Everest Partners for $14.7 million ($86 psf)reflects continuing interest in well-priced assets,even in secondary markets.

OUTLOOKWith many owners still sitting on the sidelinestrying to determine where the market and econ-omy are heading, we expect the first quarter of2002 to be a continuation of the fourth quarter.Owners will continue to watch interest rates asinstability persists in the leasing market and assesswhether the best course of action is to hold, sellor refinance.With the scarcity of product persist-ing on the supply side, the abundance of capitalwe saw in fourth quarter will continue into thenew year. Cushman & Wakefield projects that thesecond quarter will find an increase in deals mak-ing it to the market. As the leasing market beginsto stabilize in the first and second quarters, buy-ers and sellers will be better able to agree onpricing, resulting in very busy third and fourthquarters. We also anticipate that more stringentlending requirements will make refinancing lessattractive, causing an increase in the volume ofMiddle Market transactions. The market mayvery well return to a more historical norm, withfewer trophy asset sales but more MiddleMarket transactions.

Investors in the suburbs

sought the three "C"s:

credit-worthiness, core

location and cash

flow stability.

Despite the continued red-hot

demand for this property type,

few significant multi-family

sales occurred in 2001, due

primarily to a lack of product.

Middle Market sales —

the majority of which are

leveraged — faced stiff

competition from refinancing.

User (26.8%)

Foreign (18.6%)

Domestic Syndicator (16.9%)

Domestic PensionFund (11.5%)

OpportunityFund (10.6%)

REIT (9.5%)

Domestic Other (6.0%)

User

Foreign

Domestic Syndicator

Domestic PensionFund

OpportunityFund

REIT

Domestic Other

Who Is Buying the Top 25

Retail inventory in eastern Massachusetts con-sists of more than 124 million square feet (msf),including regional malls, power, neighborhoodand community shopping centers and anchorlessstrip centers. Retailers include global and inter-national grocery stores, department stores, dis-counters and a wide variety of local “mom andpop” merchants. Although local in-line tenantsconstitute the majority of retail businesses, theanchors have the greatest overall impact in themarket place.

Dynamics influencing the retail sector differ fromoffice or industrial sectors. While commercialproperty occupancies and rent levels typicallyebb and flow in concert with the national orregional economy, retail is also driven by con-sumer confidence, demand for goods and ser-vices and Wall Street’s continuing demand fornew sources of sales growth. Additional factorsinfluencing retail are property-specific includinglocation, credit and tenant synergy.

Barriers to entry in Eastern Massachusetts alsodirectly impact the retail sector on a regionalbasis. The lack of available land in suitable loca-tions and zoning restrictions curtail growth anddevelopment opportunities, limiting access formerchants attempting to enter or expand inthe market. These factors have helped to driveup prices for existing retail locations inEastern Massachusetts.

Regionally, retail in Eastern Massachusetts con-tinues to be impacted by the failure or closureof notable anchor tenant merchants who wentbankrupt or ceased operations, including Bradlees,Caldor, Lechmere, Woolworth and Ann andHope. In late 2001, in-line merchant Lechtersalso ceased operations and vacated a numerousclass A and B malls, community and strip centers.

These store closures impacted many centers;traffic was curtailed and property values declined.The immediate financial impact on the propertywas often not crippling. In many cases thebankrupt tenant continued making lease pay-ments after filing, yet the mid- and long-termimplications were potentially substantial.

However, the majority of vacated locations havebeen along strong retail corridors or in provenretail locations. Additionally, given the paucity ofavailable land for development, these vacancieshave become some of the most attractive devel-opment opportunities in the region. In fact, savvyreal estate developers and investors have takenthis opportunity to acquire the most economi-

cally advantageous and/or best located leases ofthese failed merchants and sublease the space tonewcomers to the market or those seekingexpansion opportunities.

Examples of adaptive re-use include:

• Two former Bradlees locations in Burlingtonand Woburn are currently being convertedto Kohl’s department stores.

• The vacant Ann & Hope at the Liberty TreeMall was purchased by a local developer.Prospective tenants for this space includeHome Depot and Stop & Shop.

• The vacant Lechmere store in Framinghamhas been redeveloped into a Target store.

• The vacant Caldor in Burlington was redevel-oped into a Home Depot Expo store.

Other replacement tenants who have acquiredavailable anchor locations, but did not take occu-pancy in 2001 include Wal-Mart, Lowes, Target,and Kohl’s. As Lechters closed late in the yearno replacement tenants have yet been named.

The increased revenues for replacement anchorshave not always benefited property owners.However, the resulting improvement in tenantcredit, center performance including improvedcustomer draw, increased sales volumes and theability to negotiate market rents with higherquality in-line merchants, have had a measurableimpact on performance.

Should additional anchor tenants fail or ceaseoperations, the result will be a wave of opportu-nities for the roster of large merchants who haveyet to enter the market place or who have onlybeen able to do so under limited circumstances.The existing buildings, while not to their proto-type standards, still provide a shell and footinginto the market. Required renovations, althoughextensive, are still more expedient and ultimatelyless expensive than ground up development.

Finally, another benefit of renovating existingcenters for replacement anchor tenants is thatthe net effect on existing inventory remains sta-ble, vacancy stays low and there is less down-ward pressure on rents. This will benefit propertyowners and developers, the regional retail marketin the aggregate and provide new opportunitiesfor older and functionally obsolete properties.

retail valuation overview


MARKETBEAT

Savvy developers and

investors have been acquiring

well-located vacant retail

locations and subleasing the

space to newcomers to the

market or those seeking

expansion opportunities.

Should additional anchor

tenants fail or cease

operations, the result will be

a wave of opportunities for

the roster of large merchants

who have yet to enter the

market place or who have

only been able to do so

under limited circumstances.


industrial market overviewMARKETBEAT

Despite the economic slowdown and in contrastto the constricted office activity, Greater Boston’sindustrial markets have remained fairly activethroughout 2001. Inventory of new, high qualityindustrial space is still limited, and demand isstill strong in all sectors and markets, with thenotable exception of high-tech manufacturingand IT equipment. Bucking the national trend,Massachusetts manufacturing sector has actuallyseen a drop in overall vacancy rate.

As evidence of the state’s high-tech slowdown,several companies such as Polaroid, Unisource,and Applied Power have cancelled or put onhold plans for expansion. Overall leasing activityremained strong, however. Among the region’slargest lease transactions were Trader Joe’s leaseof 350,000 sf at 800 John Quincy Adams Road, aspeculatively expanded facility in the MylesStandish Industrial Park, and United Liquors’ leaseof 484,000 sf in Campanelli Industrial Park. Otherestablished firms driving the demand for indus-trial space include CNS Wholesale Distribution(380,000 sf), NECCO (a total of 575,000 sf),Applied Materials (314,000 sf) and BarrettWarehouse Company (260,000 sf).

Despite the healthy leasing activity, GreaterBoston’s overall industrial vacancy rate inchedupward by 2.7 percentage points from year-end2000 to reach 10.6 percent at year-end. Thissoftening can be partially attributed to the addi-tion of 2.7 msf of new construction, as well asthe influx of sublease space being marketed byfirms such as Nortel, Global Crossing, and Tellabs.

With only 500,000 sf remaining under construc-tion, expectations are for continuing steady ten-ant demand and relatively quick absorption ofsomewhat limited new product. We expect tosee an end to the trend of R&D and high tech“flex” space being converted to office and labspace. Rents are expected to drop slightly, withvacancies holding firm in the low double digits.

HIGH TECHNOLOGYGreater Boston’s high-technology subsectorwithin the industrial market has felt the impactof the state’s economic slowdown, as well as theeffect of the national recession on the high-tech-nology industry as a whole. With reduced capitalspending on technology products, many firmspostponed expansion plans, downsized andreturned excess space to the market, causing thesector’s overall vacancy rate to jump from lastyear’s 5.5 percent to 12.6 percent at year end.The northern suburban submarket, which domi-nates the region in inventory, holds the lowestvacancy rate of 11.4 percent.

Landlords have responded to the drop in demandby lowering asking rates. The sector’s averageasking rental rate reached $13.71 psf, down fromlast year’s rate of $17.06 psf. While several sub-markets, such as Route 128 South, experiencedrent increases over the year, the increase isattributed to the conversion of high-tech flexspace to office use. In order to meet the adapt-ing needs of the tenants, developers have con-verted flex space to be predominantly officespace, and increased asking rents to approachoffice rates.

Despite softening demand, investors remainedactive in high-tech space throughout the year.Notable sales included 189 B Street (170,000 sf)in Needham, 15 Elizabeth Drive (130,000 sf) inChelmsford Corporate Center and 30 ForbesRoad (112,000 sf) in the I-290 Industrial Centerin Northborough.

Over 1.6 msf of new high-tech inventory wasdelivered in 2001, with another 312,000 sf stillunder construction. Significant construction com-pletions included the 444,000-sf Boston TechCenter in Brighton, a 275,000-sf build-to-suitfor NES Clothing at 154 Campanelli Drive inMiddleboro and 225,000 sf at 10 TechnologyPark Drive in Westford Technology Park, whichwas completely pre-leased.

With only 500,000 sf under

construction, expectations are

for continuing steady tenant

demand and relatively quick

absorption of somewhat limited

new product.

Many high-tech firms

postponed expansion plans,

downsized and returned excess

space to the market, causing.

the sector’s overall vacancy rate

to jump to 12.6 percent at

year end.

H

H

H

H

H H

1996 1997 1998 1999 2000 20010.0

7.0

14.0

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28.0

35.0

$2.00

$4.00

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$8.00

$10.00

$12.00(msf)(psf) Direct Rental Rates vs. Available Space

Available Space H Rental Rate

Greater Boston Industrial

H

HH

H

H

H

1996 1997 1998 1999 2000 20010.0

5.0

10.0

15.0

20.0

$0.00

$5.00

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(msf)(psf) Direct Rental Rates vs. Available Space


High-Tech


industrial market overviewMARKETBEAT

WAREHOUSE/DISTRIBUTIONWith nearly 6.6 msf in year-to-date leasing,demand for warehouse/distribution space hasremained stable during 2001. Among the firmsdriving the leasing activity were United Liquors,Trader Joe’s, Applied Materials, CNS WholesaleDistribution and ETFC Corporation.

Despite the robust leasing activity, the overallvacancy rate increased by slightly more than two percentage points over last year to reach11.4 percent at year-end. This increase is par-tially attributed to the delivery of over 1.0 msfof new warehouse/distribution inventory. Amongthe significant projects were 15 IndependenceDrive in Ayer (on behalf of Webvan), 275 JohnHancock Road in Taunton, 14 Aegean Drive inMethuen and 525 Woburn Street in Billerica.Because of Greater Boston’s current economicclimate, these new facilities are not leasing upas quickly as anticipated last year.

Last year witnessed the trend of convertingselect warehouse/distribution facilities with goodaccess, sufficient power and fiber optic cable totelecom use, especially in the 128 and InnerSuburbs markets. This conversion trend has notbeen beneficial to the market, as 2001 has seen asignificant drop in demand from the telecommu-nications sector, and developers are being forcedto search for alternate uses.

MANUFACTURINGManufacturing employment declined steadily inEastern Massachusetts over the last decade, asfirms moved operations to lower-cost regions.During the last few years the diversified manu-facturing sector’s employment has stabilized andin contrast with New England as a whole, the

state continued to add manufacturing jobsthrough 2000. However, Massachusetts lost12,900 manufacturing jobs between Decemberand July, which amounts to 2.9 percent of manu-facturing payroll employment. Though the paceof layoffs this time has been quicker than thelast, total job losses so far have been substan-tially lower. Overall demand for products bybusinesses and consumers, however, has beenconsiderably weaker.

However, manufacturing inventory is tight, andwith steady demand for manufacturing space and the conversion of obsolete space into otheruses, the overall vacancy rate has dropped to 7.2 percent, representing approximately 4.5 msf.The western submarket, historically the region’sweakest, holds the tightest vacancy rate of 5.9percent. Due to a high number of older millfacilities in Fall River/New Bedford, the southernsubmarket posts the highest manufacturingvacancy rate of 8.6 percent.

At mid-year, the region’s net average asking ratecrept upward to $6.80 psf from last year’s $5.80.With tight availabilities, rents remained the high-est in the 128 West, Northwest Corridor andNorth Shore submarkets, due to shortage ofnewer, modern facilities desired by tenants.

With stable demand for

warehouse/distribution

throughout 2001, the sector

recorded a healthy 6.6 msf

in leasing activity.

The overall vacancy rate

among manufacturing space

dropped to 7.2 percent,

with space tightest in the

western submarket.

H

H

HH

HH

1996 1997 1998 1999 2000 20010.0

2.0

4.0

6.0

8.0

10.0

$0.00

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$6.00

$8.00



Warehouse/Distribution

HH H

H H

H

1996 1997 1998 1999 2000 20010.0

2.0

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Manufacturing


industrial submarket reviewMARKETBEAT

NORTHWEST CORRIDOR■ Office/R&D transactions in this market include EFTC’s lease

of 73,000 sf at 94-104 Glenn Street in Lawrence and KevlinCorporation’s 80,000-sf lease at 596 Lowell Street, Methuen.

■ Large tenants in the market include Andover Controls,Cereva Networks, Inc. and Narad Networks.

■ Construction completions of 620,000 sf of high-tech spaceincreased inventory a slight two percent, with less than thirtypercent remaining available.

NORTH SHORE■ The 314,000-sf former Osram Sylvania building at 75 Sylvan

Road in Danvers was sold to College Street Investments for$5.7 million.

■ Applied Materials relocated a portion of its operations into280,000 sf at 75 Sylvan Street in Danvers.

■ Synventive Molding Solutions signed a lease to occupy 96,000 sf at 10 Centennial Drive in Peabody.

I-495 WEST■ Barrett Warehouse Company signed a long term sublease

from Circuit City at 15 Freedom Way in Franklin, occupying259,323 sf.

■ American Superconductor renewed its lease of 103,000 sf at Two Technology Drive in Westborough.

■ RREEF Funds purchased the I-290 Industrial Park, a six-building578,000-sf R&D complex for $30.5 million. The portfolio was89 percent occupied at the time of the sale.

■ Other companies making significant commitments to the market include EMC Corporation, IKON Office Solutions,C & S Distribution and Parcel Direct.

H

H

HH H H

H

H

H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

$4.00

$8.00

$12.00

$16.00

$20.00

0.0

2.0

4.0

6.0

8.0

10.0

(psf) (msf)Northwest Corridor

Overall Rental Rates vs. Available Space

HT Rent MF Rent W/D Rent H Available Space

H H

H

HH H H H H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

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$12.00

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North ShoreOverall Rental Rates vs. Available Space


H

H

H

H HH

HH

H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

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$16.00

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0.0

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I-495 WestOverall Rental Rates vs. Available Space




METROWEST■ Target Stores leased 40,000 sf at 1455 Concord Street in

Framingham to use as a distribution center for their arearetail stores.

■ The TJX Companies leased 65,000 sf of warehouse and distribution space at 1455 Concord Street.

■ The former Wonder Bread facility, converted to a telecomhotel, continues to have over 135,000 sf available.

■ Warehouse space in the MetroWest market has become highlysought after given its close proximity to the many retail estab-lishments located along Route 9.

128 WEST■ The 128 West industrial submarket showed slight positive net

absorption for 2001, despite a jump in the overall vacancyrate to 14.7 percent from 3.1 percent a year ago.

■ General Dynamics purchased the 170,000-sf high-tech buildingat 189 B Street in the New England Industrial Center for$6.6 million, or $39.00 psf.

■ Repligen leased 25,000 sf of laboratory space at 20 SeyonStreet in Waltham.

■ Becton Dickinson renewed their 63,000-sf lease at 411 WaverlyOaks Drive in Waltham.

WORCESTER■ FedEx has chosen the Worcester Corporate Center location

for construction of a regional distribution center.

■ The former Hanover Insurance building, 81,500 sf locatedat 100 Century Drive, is under agreement to a user-buyer.

■ State Street Bank has chosen Centech Park in Grafton as thesite for a new 110,000-sf data center. The transaction willinvolve the acquisition of 22 acres of land.

HH

HH

HH H

H

H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

0.0

1.0

2.0

3.0

4.0

5.0

6.0(psf) (msf)

MetroWestOverall Rental Rates vs. Available Space


H

HH H H

HH

H

H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

$10.00

$20.00

$30.00

$40.00

0.0

1.0

2.0

3.0

4.0(psf) (msf)

128 WestOverall Rental Rates vs. Available Space


H

H

HH

H H

H

H

H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

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$10.00

$15.00

$20.00

$25.00

$30.00

0.0

1.0

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3.0

4.0

5.0

6.0

(psf) (msf)Worcester

Overall Rental Rates vs. Available Space


industrial submarket review



I-495 SOUTH■ Champion Exposition Services moved into a 95,000-sf facility at

139 Campanelli Drive in Middleboro that will house their cor-porate headquarters and handle their local warehousing needs.

■ Weyerhauser leased 88,000 sf of warehouse/distribution spacein Campanelli Business Park.

■ The former Shaw’s Supermarkets distribution site, 520,000 sf at 140 Laurel Street in East Bridgewater, is available for sale or lease.

128 SOUTH■ Reebok has subleased 250,000 sf at 625 University Avenue in

Norwood, an expansion and relocation from their Avon facility.

■ United Liquors has leased 484,000 sf in a former Bradleeswarehouse in Braintree.

■ Sears leased 73,567 sf of warehouse space at 21 Pacella ParkDrive in Randolph.

ROUTE 3 SOUTH■ Maline Tile, Inc. leased the entire 37,700-sf facility at 20

Reservoir Park Drive in Rockland.

■ An 80,000-sf warehouse condominium building is being builton a speculative basis on Libbey Parkway in Weymouth.

■ The Campanelli Companies purchased 60 Research Road inSouth Shore Industrial Park in Hingham, a 58,655-sf high-techbuilding, for $3,125,000.

HH

HH

HH H H

H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

$3.00

$6.00

$9.00

$12.00

$15.00

0.0

2.0

4.0

6.0

8.0

10.0(psf) (msf)

I-495 SouthOverall Rental Rates vs. Available Space


H HH

H

H

H HH H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

$3.00

$6.00

$9.00

$12.00

$15.00

0.0

2.0

4.0

6.0

8.0

10.0(psf) (msf)

128 SouthOverall Rental Rates vs. Available Space


H H H

H H H H H H

4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01$0.00

$3.00

$6.00

$9.00

$12.00

$15.00

0.0

2.0

4.0

6.0

8.0

10.0

(psf) (msf)

Route 3 SouthOverall Rental Rates vs. Available Space



MARKETBEAT

industrial market highlights

Square PropertyBuilding Submarket Tenant Feet Type

175 Campanelli Drive, Braintree 128 South United Liquors 484,000 Warehouse15 Independence Drive, Ayer Worcester CNS Wholesale Distribution 379,755 WarehouseMyles Standish Industrial Park, Taunton I-495 South Trader Joe’s Supermarkets 350,000 Warehouse75 Sylvan Street, Danvers North Shore Applied Materials 280,000 High Technology

SIGNIFICANT 2001 NEW LEASE TRANSACTIONS

Square PurchaseBuilding Submarket Buyer Feet Price

3000 Minuteman Road, Andover North Shore Phillips Electronics 746,711 $59,500,00025 Tucker Drive, Leominster Worcester Holliday Housewares 588,000 $16,750,000I-290 Industrial Park, Northborough I-495 West RREEF Funds 578,000 $30,500,00011–16 Elizabeth Drive, Chelmsford Northwest Corridor Brooks Automation 284,613 $27,000,000109–111 Constitution Boulevard, Franklin I-495 West RREEF Funds 384,000 $25,480,000

SIGNIFICANT 2001 SALE TRANSACTIONS

Square Percent CompletionBuilding Submarket Property Type Feet Vacant Date

Boston Tech Center, Brighton Boston–West High Technology 440,000 100% November15 Independence Drive, Ayer Worcester Warehouse 379,755 0% January154 Campanelli Drive, Middleborough Fall River/New Bedford High Technology 275,000 0% April1–2 Quorum Way, Chelmsford Northwest Corridor High Technology 265,000 100% October275 John Hancock Road, Taunton I-495 South Warehouse 238,397 68% September

SIGNIFICANT 2001 CONSTRUCTION COMPLETIONS

Square Percent CompletionBuilding Submarket Property Type Feet Vacant Date

90 Central Street, Boxborough Northwest Corridor High Technology 175,000 0% Aug-0151 Alder Street, Medway I-495 West High Technology 160,000 100% Sep-02Weyerhauser Building, Freetown Fall River/New Bedford Warehouse 88,200 0% Jul-0210 Industrial Avenue, Chelmsford Northwest Corridor High Technology 84,000 100% May-02Walpole Park South VII, Walpole I-495 South Warehouse 56,400 100% Feb-02

SIGNIFICANT PROJECTS UNDER CONSTRUCTION

Available Property PosessionBuilding Submarket Direct/Sublease Square Feet Type Date

140 Laurel Street, East Bridgewater I-495 South Direct 520,782 Warehouse Immediate26 Millbury Street, Auburn Worcester Direct 466,000 Manufacturing ImmediateBoston Tech Center, Brighton Boston–West Direct 440,000 High Technology Immediate20 Seyon Street, Waltham 128 West Sublease 443,665 High Technology ImmediateNorth Bedford Street, East Bridgewater I-495 South Direct 330,000 High Technology Immediate495 Woburn Street, Tewksbury Northwest Corridor Direct 260,000 High Technology Immediate

SIGNIFICANT LEASE AVAILABILITIES


MARKETBEAT

industrial market statistics

HT MFG W/D OS

Northwest Corridor 54,189,485 762 10.3% 2,736,110 312,000 852,950 (717,710) $16.42 $8.11 $6.82 N/A

North Shore 27,261,330 329 8.3% 1,556,394 0 40,000 10,720 $13.05 $8.62 $7.82 N/A

North Market Total 81,450,815 1,091 9.7% 4,292,504 312,000 892,950 (706,990) $15.67 $8.35 $7.22 N/A

I-495 West 31,193,772 384 11.5% 1,935,505 160,000 100,000 (248,951) $13.34 $6.03 $6.20 N/A

MetroWest 10,110,197 97 5.9% 519,955 0 0 312,403 $21.54 $5.00 $10.82 N/A

Worcester 15,991,078 146 13.7% 822,334 0 429,755 (727,436) $11.87 $8.18 $4.40 N/A

128 West 8,898,969 141 14.7% 254,501 0 232,650 10,413 $16.93 $18.00 $13.63 N/A

West Market Total 66,194,016 768 11.6% 3,532,295 160,000 762,405 (653,571) $14.24 $7.13 $6.07 N/A

128 South 24,395,487 333 9.4% 2,672,990 0 334,000 675,422 $13.15 $6.88 $6.13 N/A

I-495 South 23,746,843 320 12.5% 1,944,815 56,400 687,397 (707,397) $5.83 $7.77 $5.85 N/A

Route 3 South 6,220,485 97 6.9% 200,137 0 0 80,484 $10.12 $7.25 $5.22 N/A

Fall River/New Bedford 7,901,983 59 12.3% 443,550 0 0 386,981 $13.00 $2.32 $4.14 N/A

South Market Total 62,264,798 809 10.7% 5,261,492 56,400 1,021,397 435,490 $8.93 $4.17 $5.90 N/A

Greater Boston Total 209,909,629 2,668 10.6% 13,086,291 528,400 2,676,752 (925,071) $13.71 $6.80 $6.32 N/A

By Property Type 2001 2000 1999 1998

High Technology 71,452,056 949 12.6% 4,462,198 312,000 1,620,650 (188,090) $13.71 $17.06 $15.87 $15.00

Manufacturing 61,583,878 833 7.2% 2,022,588 0 0 (599,005) $6.80 $5.80 $9.06 $7.33

Warehouse/Distribution 76,544,825 882 11.4% 6,601,505 56,400 1,056,102 (104,976) $6.32 $6.03 $7.77 $7.36

Office Service 278,370 2 0.0% 0 160,000 0 0 N/A $10.00 N/A N/A

Other 50,500 2 65.3% 0 0 0 (33,000) $7.50 N/A N/A N/A

Greater Boston Total 209,909,629 2,668 10.6% 13,086,291 528,400 2,676,752 (925,071) $8.92 $8.74 $10.98 $9.71

**Inventory is not complete

**Rental rates reflect $psf/year

Overall YTD YTD YTD No. of Vacancy Leasing Under Construction Net Direct Weighted Average

Market/Submarket *Inventory* Bldgs. Rate Activity Construction Completions Absorption **Net Rental Rate**

Led by the dot.coms, the

technology sector began its

rapid decline as bankruptcies

led to layoffs and sublease

space flooded markets

across the country.

In the Central Business Districts

(CBDs), new construction was

approximately 90 percent

pre-leased, resulting in a

well-balanced relationship

between supply and demand.

AN ECONOMYIN RECESSIONThe fourth quarter of 2000 proved to be aharbinger for both the national economy and thereal estate markets in 2001. Led by the dot.coms,the technology sector began its rapid decline asbankruptcies led to layoffs and sublease spaceflooded markets across the country.

This trend continued throughout the first quar-ter of 2001 as the economy began to slow con-siderably. After increasing an average 2.4 percentannually from 1998 to 2000, employment growthfizzled in 2001 and is expected to increase byonly 1.8 percent annually over the next two years.The recession spread to the manufacturing, finan-cial and retail industries and no region of thecountry has been insulated from the downturn.

Gross domestic product (GDP) also reflectedthis economic malaise and declined at an annual-ized rate of 1.3 percent and stood only 0.5 per-cent above the level of a year ago, representingthe smallest increase in 10 years. Despite theFederal Reserve lowering interest rates eleventimes in 2001 in an attempt to stimulate theeconomy, the U.S. had already entered a reces-sion by the close of the second quarter. Lookingforward to the anticipated recovery in 2002, thenation’s economy is expected to grow at an annu-alized rate of 2.8 percent through 2003, one-thirdof the pace set between 1996 and 2000.

IMPACT ON THEOFFICE MARKETSublease space was the supply side story in 2001.Initially driven by the dot.com industry, other sec-tors began to follow suit in returning space to themarket. The result was a record amount of sub-lease space becoming available in the office market.

Markets suffered a double blow as construction,already in the pipeline to satisfy the artificial,pent-up demand of technology firms, was deliv-ered as well. In the Central Business Districts(CBDs), new construction was approximately 90percent pre-leased, resulting in a well-balancedrelationship between supply and demand. Thesituation was not the same in the suburban (ornon-CBD) markets as evidenced by rapidlyincreasing vacancy rates across the nation.

Washington, D.C. is the strongest CBD per-former. Atlanta and Los Angeles are also show-ing signs of potential improvement, postingdeclining vacancy rates in fourth quarter.

The suburban markets are in a more precariousposition, however, as construction deliveries areexceeding demand by a large margin. There are

Employment Outlook 2002Estimated Annual Percent Change

Moderate Growth 0.6 to 1.9Stable -0.1 to 0.6Declining -1.0 to -0.1

Source: Economy.com, BLS

1996 1997 1998 1999 2000 20010.0

20.0

40.0

60.0

80.0

(msf)National Office Sublease Availabilities

CBD vs. Non-CBD

CBD Non-CBD

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

0.0

25.0

50.0

75.0

100.0

125.0

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

(msf) Construction Completions vs. Overall Vacancy Rates

CBD Completions Non-CBD CompletionsCBD Vacancy Rate Non-CBD Vacancy Rate

National Office

Forecast

Market Cycles Across CBD Office Markets4Q01–4Q03

• Washington, D.C.

• Philadelphia

• Miami

•• Seattle

New York Midtown •Boston •

New York Downtown •• San Francisco

•

•Houston •Los Angeles •

Atlanta •

Accelerating Weakening Downturn Recovering

Market Equilibrium

Dallas

DenverChicago


MARKETBEAT

u.s. commercial real estate overview


MARKETBEAT

u.s. commercial real estate overview

Rents will decline in virtually all

suburban markets throughout

the forecast period.

some exceptions, such as Northern New Jerseyand Los Angeles, which are representative of sub-urban markets still at or above market equilibrium.

RENTAL RATE OUTLOOKThe national CBD average asking rental rate isexpected to remain flat in 2002 and will begin toincrease in 2003. Washington, D.C., Los Angelesand Atlanta should achieve two to five percentannual rent increases through 2003 while SanFrancisco and Manhattan will see rents decline byroughly four percent over the same time period.

Rents will decline in virtually all suburban mar-kets throughout the forecast period. Los Angelesis the only notable exception where rental rategrowth will outpace inflation through 2003.

THE INDUSTRIALMARKETSThe industrial markets have been equally effectedby the recession. The year-end 2001 nationalindustrial vacancy rate was 8.1 percent, up from6.0 percent at year-end 2000. New completionsamounted to 132.1 msf, primarily consisting ofspeculative warehouse/distribution space. In fact,virtually no new manufacturing space was deliv-ered in 2001, resulting in only a minimal increasein the overall manufacturing vacancy rate. Thegood news for industrial markets is that con-struction activity will slow noticeably in 2002and 2003 and will be less speculative in nature.Consistently strong warehouse/distribution mar-kets include Central New Jersey, Dallas, Chicagoand Los Angeles.

INVESTMENT RETURNSAccording to the NCREIF Property Index, theWest region was the strongest performer in2001 with returns at 12.47 percent. Industrialand apartments were the stellar property sectors,with returns of 12.20 and 11.78 percent, respec-tively. Office and Retail followed, holding theirown with annual returns of 10.53 and 7.18 per-cent, respectively. Hotels were the worst per-formers posting an anemic annual return ofnegative 0.82 percent.

Market Cycles Across Non-CBD Office Markets

• Denver & Chicago

• Los Angeles

• Silicon Valley

• South Florida

Philadelphia •Seattle •Boston •

• Northern Virginia

Northern New Jersey •

Atlanta •

Accelerating Weakening Downturn Recovering

Market Equilibrium •

• Dallas

Houston

San Francisco

Manhattan

Boston

Dallas

Houston

Philadelphia

Chicago

Los Angeles

Atlanta

Washington, D.C.

(15.0

%)

(12.0

%)

(9.0%

)

(6.0%

)

(3.0%

)0.0

%3.0

%6.0

%9.0

%12

.0%

Average Overall Asking Rent Growthby CBD Office Market 4Q01–4Q03

Philadelphia

Boston

Dallas

San FranciscoRegion

Chicago

Atlanta

New York Region

Houston

Northern VA/Suburban MD

Los Angeles

(14.0

%)

(12.0

%)

(10.0

%)

(8.0%

)

(6.0%

)

(4.0%

)

(2.0%

)0.0

%2.0

%4.0

%

Average Overall Asking Rent Growthby Non-CBD Office Market 4Q01–4Q03

1995 2001 2002 2003 20040.0

20.0

40.0

60.0

80.0

100.0

(msf) Built-to-Suit vs. Speculative

Built-to-Suit Speculative

Industrial Construction Completions

Forecast based onUnder Construction and Proposed

CompletionsConstruction

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

3Q01

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Private Equity Annual Returns by Region

East

South

Midwest

West

Source: NCREIF


glossary/major market defintionsMARKETBEAT

glossary/major market defintions

OFFICEInventory: Includes all existing competitive office buildings thatsatisfy the rentable square footage cut-off size or larger.Government,medical and owner-occupied buildings are not included.

Class A: Most prestigious buildings competing for premier officeusers with above average rents for the area. Buildings have highquality standard finishes, state-of-the-art systems, exceptionalaccessibility and suggest a definitive market presence.

Class B: Buildings competing for a wide range of office userswith average rents for the area. Building finishes are fair to goodfor the area and systems are adequate, but the buildings do notcompete with class A at the same price.

Class C: Buildings competing for tenants requiring functionalspace at below average rents for the area.

CBD: Central Business District. The “downtown” area.

Non-CBD: The area around a city. The “suburban” area.

OFFICE & INDUSTRIALDirect Available Space: Space available through the buildinglandlord.

Sublease Space: Space available through the lessee to a thirdparty for the remainder of the lessee’s term.

Overall Vacancy Rate: Space, available both directly andthrough sublease, divided by the inventory. Space in propertiesunder construction or under renovation is not included.

Direct Vacancy Rate: Space, available through the landlord,divided by the inventory. Space in properties under constructionor under renovation is not included.

Net Absorption: The net change in occupied space for a given period of time, excluding sublet space, pre-leasing activityand renewals.

Leased Space Absorption: The change in occupied space for a given period of time, including sublet space and excluding pre-leasing activity and renewals.

Construction Completions: Buildings that received theirCertificate of Occupancy. Tenancy may not yet have taken place.

Under Construction: Projects which are beyond site preparation.A Certificate of Occupancy has not been issued. Underconstruction projects do not include projects under renovation.

Proposed: Projects which are in the planning stages and may,or may not, have been approved. Construction has not yet begun.

Leasing Activity: The sum of all completed transactions ina given period of time, including sublet space and pre-leasingbut excluding renewals.

Pre-Leasing Activity: The sum of all completed lease transac-tions in under construction, under renovation and proposed projects.

Asking Rental Rates: Gross asking rates per square foot fordirect space, weighted by the amount of square footage available.

Sales Activity: Existing building sale transactions executedduring a period of time.

Cap Rate: The percentage used to determine the value of incomeproperty through capitalization.

INDUSTRIALHigh-Tech/Research & Development: Flexible-use spacedesigned for office, research and development, laboratory, lightassembly and technology-oriented uses. The building may beone or two story facilities comprised of roughly 80 percent to100 percent office finish with dock-level truck doors and ceilingheights between 12 and 15 feet. Parking ratios are typically in therange of four spaces per 1,000 square feet.

Manufacturing: Buildings with extensive power capabilitiesable to accommodate heavy equipment. The structures generallyhave thick flooring, some grade level doors, and less than 20 per-cent office.

Warehouse/Distribution: Modern, one- and two-story industrialbuildings designed primarily for distribution with typical office fin-ish of 0 percent to 30 percent, clear ceiling heights ranging from16 to 28 feet and dock- or grade-level truck loading. Warehousefacilities are designed to accommodate the warehousing, distribu-tion and light assembly of goods.

Asking Rental Rates: Triple net asking rate per square foot fordirect space, weighted by the amount of square footage available.

MAJOR MARKET DEFINITIONSBoston CBD Office: The Central Business District encom-passes the following areas: Financial District, GovernmentCenter/North Station, Midtown, Back Bay, South Station/FortPoint Channel and Charlestown.

Boston Non-CBD Office: The Non-CBD market encompassesthe following areas: Alewife/Fresh Pond, Mass. Avenue/HarvardSquare, Kendall Square/East Cambridge, Somerville/Medford/Malden, Allston/Brighton/Watertown, 128 North, 128 West,128 South, Metrowest, I-495 North, I-495 West, I-495 South.

Southern New Hampshire Office: The Southern NewHampshire market includes the following areas: Nashua,Manchester, Bedford, Portsmouth and Concord.

Boston Industrial: The Industrial market encompasses thefollowing areas: 495 West, Metrowest, Worcester, 128 West,Northwest Corridor, North Shore, 128 South, I-495 South,Route 3 South and Fall River/New Bedford.

Cushman & Wakefield provides consistent, best-of-class real estate services for its clients around the globe.Its 11,000+ employees located in 147 offices in 49 countries meet the rapidly changing needs of the businessworld while maintaining Cushman & Wakefield’s quality standards throughout international markets.

Cushman & Wakefield International Offices

Cushman & Wakefield Offices – UNITED STATES

Cushman & Wakefield Offices – ASIA PACIFIC Royal LePage Offices – CANADA

ArizonaPhoenix

CaliforniaContra CostaLos AngelesL.A. NorthL.A. South BayL.A. WestOaklandOntarioOrange CountySan DiegoSan FranciscoSan JoseWalnut Creek

ColoradoDenver

ConnecticutHartfordStamford

DelawareWilmington

District ofColumbiaWashington

FloridaFt. LauderdaleJacksonvilleMiamiOrlandoTampa

GeorgiaAtlanta

IllinoisChicagoChicago Suburban

MassachusettsBoston

MichiganDetroit

MinnesotaMinneapolis

MissouriSt. Louis

NevadaLas Vegas

New HampshireManchester

New JerseyEast RutherfordIselinParsippany

New YorkMelvilleN.Y. – DowntownN.Y. – Midtown

OregonPortland

PennsylvaniaPhiladelphia

TexasDallasDallas SuburbanHouston

VirginiaMcLean

WashingtonBellevueSeattle

AustraliaAdelaideBrisbaneGold CoastMelbournePerthSydney

ChinaBeijingHong KongShanghai

IndiaBangaloreMumbaiNew Delhi

JapanTokyo

MalaysiaKuala Lumpur

New ZealandAucklandWellington

Singapore

South KoreaSeoul

ThailandBangkok

AlbertaCalgaryEdmonton

British ColumbiaVancouver

ManitobaWinnipeg

New BrunswickMonctonSaint John

NewfoundlandSt. John’s

Nova ScotiaHalifax

OntarioOttawaToronto CentralToronto SuburbanToronto West

QuébecMontréal CentralMontréal Suburban

SaskatchewanReginaSaskatoon

Healey & Baker Offices – EUROPE, MIDDLE EAST & AFRICA

AustriaVienna

BelgiumBrussels

Channel IslandsJersey

Czech RepublicPrague

DenmarkCopenhagen

EnglandLondon-CityLondon-West End

FinlandHelsinki

FranceParis

GermanyDüsseldorfFrankfurtMunich

GreeceAthens

HungaryBudapest

IrelandCorkDublin

IsraelTel Aviv

ItalyBolognaMilanRome

KuwaitKuwait City

LatviaRiga

LebanonBeirut

LithuaniaVilnius

Luxembourg

The NetherlandsAmsterdamRotterdam

Northern IrelandBelfast

NorwayOslo

PolandWarsaw

PortugalLisbon

RomaniaBucharest

RussiaMoscowSt. Petersburg

ScotlandEdinburghGlasgow

SlovakiaBratislava

South AfricaCape TownDurbanEmpangeniJohannesburgPort ElizabethPretoria

SpainBarcelonaMadrid

SwedenStockholmMalmo

SwitzerlandAargauBaselBernGenevaLuzernSt. GallenZürich

TurkeyIstanbul

United ArabEmiratesAbu DhabiDubai

Cushman & Wakefield/GCI Offices – MEXICO Cushman & Wakefield/SEMCO Offices – SOUTH AMERICA

MexicoCiudad Juárez

GuadalajaraMexico City

MonterreyQuerétaro

ArgentinaBuenos Aires

BrazilRio de JaneiroSão Paulo

ChileSantiago

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