CAMBRIDGE OFFICE & LAB MARKET REPORT

SECOND QUARTER 2019

MARKET NOT COOLING DOWN AS SUMMER BEGINSIn the second quarter of 2019, Cambridge continued to maintain incredibly low office

and lab vacancy rates with asking rents augmenting even further. Recently, Massachusetts

moved up the list to become the second ranked state nationally in venture capital funding,

moving ahead of New York. This was in large part due to Cambridge’s reputation as one

of the world’s premier technology and innovation markets. With prestigious universities

such as Harvard and MIT deeply embedded in Cambridge’s fabric, some of the world’s

most innovative new companies are eager to expand in or relocate to the tech hub.

Largely fueled by the explosive growth of life science, technology and biotech sectors,

Cambridge has over one million square feet of spec life science space under development

for delivery between 2019 and 2021 in order to satisfy the demand. Looking forward,

Cambridge’s future remains extremely bright with a deep concentration of intellectual

and investment capital keeping the market fueled for years to come.

3.0%MAY

MASSACHUSETTS UNEMPLOYMENT

3.6%MAY

NATIONAL UNEMPLOYMENT

$12BMASSACHUSETTS ANNUAL (2018) VC FUNDING

#1NATIONALLY

R&D FUNDING PER CAPITA

MARKET TRENDS

GLOBAL DESTINATIONWorld leader in medical innovation and

technology advancement

TECHNOLOGY & INNOVATION HUB

Fortune 500 leaders and 1,900 homegrown startups

LIFE SCIENCE SECTOR SURGESHuge demand from National and

International companies

WHERE IS THE RELIEF?Small and medium size users face

historic competition

MARKET RATES KEEP RISING

Demand out-pacing supply,no relief for price sensitive users

COWORKING SPACE DISRUPTING MARKET

Tenants like flexibility and shorter term commitments

INVESTMENT SALES PRICING CLIMBING

Properties are setting record pricing

$28.00

$34.00

$40.00

$46.00

$52.00

$58.00

$64.00

$70.00

$76.00

$82.00

$88.00

Average Asking Rate

201920182017201620152014201320122011201020092008200720060%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Direct Vacancy (%)

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.00

Average Asking Rate

201920182017201620152014201320122011201020092008200720060%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Direct Vacancy (%)

OFFICE CLASS AASKING RATE VS. DIRECT VACANCY

OFFICE CLASS BASKING RATE VS. DIRECT VACANCY

DIRECT VACANCY RATE BY SUBMARKET

0% 2% 4% 6% 8% 10% 12%

East - Lab

Mid - Lab

East - O�ce

Mid - O�ce

West - O�ce

West - Lab

none

VACANCY

1.8%

CAMBRIDGE OFFICE STATS AT A GLANCE

SUBLEASE

3.8%ABSORPTION

37,900 sf

ASKING RATE

$77.88/sfAVAILABILITY

10.6%CONSTRUCTION

2.8MM sf

WEST CAMBRIDGE

OFFICE $54.27/SF

LAB $61.92/SF NNN

MID CAMBRIDGE

OFFICE $68.99/SF

LAB $84.05/SF NNN

EAST CAMBRIDGE

OFFICE $90.02/SF

LAB $90.30/SF NNN

CLASS A & B OFFICE

1.8% DIRECT VACANCY

3.8% SUBLEASE AVAILABILITY

#10.6% TOTAL AVAILABILITY

#37,900 SF 12-MONTH ABSORPTION

#$77.88/SF AVERAGE ASKING RATE

• With so little vacancy, development remained the name of the game

across Cambridge’s office market. Construction moved along at

314 Main Street where Capital One and Boeing will anchor the new

tower once completed next year. Meanwhile at 145 Broadway, where

Akamai has pre-leased the entire building from Boston Properties,

rumors suggest that Google has executed a 150,000 square foot

sublease. The sublease will promote Google’s rapid Cambridge

expansion as the tenant awaits commencing construction of its

336,500 square foot offices at 325 Main Street where they will serve

as the sole office tenant. The tech giant will likely occupy roughly one

million square feet by the time its new building comes on-line in 2022.

• In a strategic move to free up capital for the Volpe Center

redevelopment project, MIT recently brought in outside capital

for the ground lease rights of One Portland Street and 610 & 700

Main Street. The office and lab portfolio (Osborn Triangle) contain

677,000 square feet and is home to Pfizer, Novartis, and LabCentral.

A partnership between Bulfinch Companies and Harrison Street

Capital paid $1.1 billion or $1,626 per square foot for the leasehold

rights of the premier assets.

• Another MIT property, 139 Main Street, located in the heart of

Kendal Square, has quietly filled up with numerous small tenants.

The property was formerly owned and utilized by the American Red

Cross, before it was acquired by MIT in September 2017 for roughly

$685 per square foot. The small tenants are all on relatively short-

term deals which begs the question what is the long-term plan for the

property and any future redevelopment.

• As another barometer for the health of Cambridge’s market,

companies forced to relocate to other locations due to cost and

availability constraints speaks strongly of the market’s competitive

nature. Major biotech firm Ironwood Pharmaceuticals plans to

relocate its headquarters to a new office in downtown Boston from

its current location in Cambridge’s Kendall Square. Ironwood’s new

headquarters will occupy approximately 39,000 square feet at 100

Summer Street.

ADDRESS SUBMARKET TENANT SF

325 Main Street East Cambridge Google 336,500

150 Broadway East Cambridge Google 150,000 (sublease)

314 Main St East Cambridge Capital One 78,300

1100 Mass Ave Mid Cambridge Commonwealth Massachusetts 10,000

1100 Mass Ave Mid Cambridge Compass Real Estate 10,000

NOTABLE RECENT LEASES

CLASS A & B OFFICE

$20.00

$27.00

$34.00

$41.00

$48.00

$55.00

$62.00

$69.00

$76.00

$83.00

$90.00

20192018201720162015201420132012201120102009200820070.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

2019201820172016201520142013201220112010200920082007

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

West Mid East

OFFICE & LAB DEVELOPMENT PIPELINE

145 BROADWAY Office & Lab

314 MAIN STREET Office

250 NORTH STREET Office & Lab

238 MAIN STREET Lab

400/500 CAMBRIDGE DISCOVERY Office & Lab

325 MAIN STREET Office

350 DAWES Office

450 DAWES Lab

CLASS A & B LAB

#0.6% DIRECT VACANCY

0.2% SUBLEASE AVAILABILITY

#1.3% TOTAL AVAILABILITY

# 62,800 SF 12-MONTH ABSORPTION

#$87.51/SF AVERAGE ASKING RATE

• Bluebird Bio plans to expand its Kendall Square headquarters when

its neighbor moves out. Bluebird will sublease 267,000 square feet

at 50 Binney Street from Sanofi, where the gene therapy company

currently occupies the other half of the newly developed property.

Originally developed by Alexandria, the premier property was

delivered in 2017 and anchors the eastern end of Binney Street

closest to the Charles River. Sanofi’s consolidation and relocation

to Cambridge Crossing has been well documented, now with the

company recently marketing its Second Avenue property in Waltham

for sale with a short-term leaseback in-place.

• Codiak BioSciences and Glympse Bio have relocated from their

Kendall Square homes to West Cambridge’s Alewife Research

Center. The 223,000 square foot laboratory property (re)developed

by The Davis Company & Invesco is now fully occupied. The facility

is located at 35 CambridgePark Drive, Pfizer’s former facility, and is

only steps away from the Red Line at Alewife. Other tenants include

Eisai Company, Syros Pharmaceuticals, and Ribon Therapeutics. The

fully stabilized property is now on the shopping block with whispers

of pricing around $1,286 per square foot which translates to a

mid-5.0% cap rate; however, pricing could easily compress with the

voracious investment appetite for life science.

• Cambridge drug discovery company FogPharma is growing its

footprint more than fivefold with a 115,000 square foot lease at

the Bulfinch Company’s Cambridge Discovery Park. FogPharma

will expand in CDP’s Building 400-500 which is currently under

construction and will become the newest life science addition to the

thriving West Cambridge submarket. The tenant will have exclusive

use of Building 400’s lobby and exterior signage. Those close to

the deal suggest that LifeMine Therapeutics, a sister company, will

sublease up to half the space as FogPharma performs a phased

growth plan.

• Construction pushed along at 238 Main Street in Kendall Square

where MIT is developing a 380,000 square foot life science facility.

The property is currently 80%+ committed with rents likely

pushing into the $100+ NNN range. Nowadays, the opportunity to

occupy brand new space in Kendall Square does not come often or

inexpensively and all indications suggest the growth has no reason to

throttle back.

ADDRESS SUBMARKET TENANT SF

50 Binney Street East Cambridge Bluebird Bio 267,300 (sublease)

88 Sidney Street Mid Cambridge Agios Pharmaceuticals 146,000

Cambridge Discovery Park West Cambridge FogPharma 115,000

301 Binney Street East Cambridge Cyclerion Therapeutics 114,500

35 CambridgePark Drive West Cambridge Codiac Biosciences 68,300

35 CambridgePark Drive West Cambridge Glimpse Bio 22,700

NOTABLE RECENT LEASES

CLASS A & B LAB

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

201920182017201620152014201320122011201020092008

AVERAGE DIRECT VACANCY BY SUBMARKET

AVERAGE ASKING RATE BY SUBMARKET

West Mid East

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.00

$75.00

$80.00

$85.00

$90.00

201920182017201620152014201320122011201020092008

BEHIND THE SCENES WHATS DRIVING DEMAND?

VC INVESTMENT BEING CONCENTRATED INTO FEWER DEALS, BUT TOTAL INVESTMENT GROWING

OFFICE RENTS

55%

IN THE PAST 5 YEARS

MA Funding (2018)

$2.9 BILLION

HIGHER THAN STATEWIDE17%

$83,100MEDIAN HH INCOME

180 BASIS POINTS LOWER THAN NATIONAL AVERAGE

CAMBRIDGE UNEMPLOYMENT RATE

START-UP, TECHNOLOGY & LIFE SCIENCE COMPANIES

TECHNOLOGYINCUBATORS

BOSTON IS THE #2 TOP NATIONAL

STARTUP HUB

15% OF CAMBRIDGE'S TOP 25 EMPLOYERS ARE LIFE SCIENCE OR TECH COMPANIES

LIFE SCIENCE & VC HUB

OFFICE & LAB REPORT STATS

OfficeTotal

Inventory (SF)Direct

VacancySublease

AvailabilityTotal

Availability Quarterly

Absorption (SF)12 Month

Absorption (SF)Average

Asking Rate

TOTAL A & B

Cambridge 11,117,200 1.8% 3.8% 10.6% (6,350) 37,900 $77.88

East Cambridge 6,051,350 1.0% 3.5% 12.5% 1,850 13,950 $90.02

Mid Cambridge 3,135,700 2.2% 1.9% 5.3% (7,000) (11,150) $68.99

West Cambridge 1,930,150 3.7% 7.8% 13.3% (1,200) 35,150 $54.27

CLASS A

Cambridge 7,360,450 1.5% 5.1% 8.4% 1,750 33,650 $82.89

East Cambridge 5,032,500 0.8% 4.1% 7.0% 15,450 (16,400) $90.67

Mid Cambridge 1,224,500 0.5% 3.7% 4.2% 6,100 31,500 $72.25

West Cambridge 1,103,450 5.8% 11.3% 19.1% (19,800) 18,550 $59.25

CLASS B

Cambridge 3,756,700 2.4% 1.1% 15.0% (8,100) 4,250 $68.06

East Cambridge 1,018,850 1.7% 0.4% 39.8% (13,600) 30,300 $86.80

Mid Cambridge 1,911,200 3.3% 0.7% 6.0% (13,100) (42,650) $66.90

West Cambridge 826,650 1.0% 3.1% 5.5% 18,600 16,600 $47.63

LabTotal

Inventory (SF)Direct

VacancySublease

AvailabilityTotal

Availability Quarterly

Absorption (SF)12 Month

Absorption (SF)Average

Asking Rate

TOTAL A & B

Cambridge 14,662,550 0.6% 0.2% 1.3% 189,400 62,800 $87.51

East Cambridge 9,660,700 0.0% 0.0% 0.0% - 4,000 $90.30

Mid Cambridge 4,336,800 0.4% 0.5% 1.7% 2,550 (7,650) $84.05

West Cambridge 665,000 10.7% 1.3% 17.6% 186,850 66,450 $69.57

CLASS A

Cambridge 12,174,400 0.0% 0.0% 0.0% - 4,000 $88.70

East Cambridge 9,005,750 0.0% 0.0% 0.0% - 4,000 $90.50

Mid Cambridge 3,039,550 0.2% 0.0% 0.2% - - $84.00

West Cambridge 129,100 0.0% 0.0% 0.0% - - $74.00

CLASS B

Cambridge 2,488,100 3.3% 0.8% 4.2% 7,550 17,150 $81.67

East Cambridge 654,950 0.0% 0.0% 0.0% - - $87.50

Mid Cambridge 1,297,250 0.9% 1.6% 5.1% 2,550 (7,650) $84.17

West Cambridge 535,900 13.2% 0.0% 6.9% 5,000 24,800 $68.50

Lincoln Property Company | 53 State Street, 8th Floor, Boston, MA | 617.951.4100 | LPCBoston.com

Lincoln Property Company’s Boston Office Report is produced by the Boston Office’s research team in collaboration with our Cambridge Brokerage Group. If you have any questions regarding market conditions and the information found in this report, please contact Ethan Robert.

ETHAN ROBERTDirector of Research 617.951.4160 erobert@lpc.com

CONNOR MALONEYAnalyst 617.951.4141 comaloney@lpc.com