Boston Cambridge Suburbs Q2 2011

Highlights
Increase in Cambridge Vacancy Incremental Growth in the Suburbs Availability Increased to 16.7% Sublease Space at only 400,000 SF VC Funding Surges in Q2

Research
Class of 2011 MA IPOs

Q2 2011

Economic Indicators
Venture funded companies that started amidst the recession years of 2008 to 2010 have begun to bud in 2011. Companies, like the following that were recently highlighted by the Massachusetts High Techs weekly Startup Report were all funded during the recession period: Zioray Technologies Inc. (Boston); X-Chem Inc. (Waltham); Tempero Pharmaceuticals Inc. (Cambridge); ImmusenT Inc. (Cambridge); Tal Medical Inc. (Boston); and TeraDiode Inc. (Littleton). All of these companies will likely require, if not already, laboratory space; which highlights the growing tenant demand that is poised to occur in the communities mentioned above. All of these companies have either been incubated in MIT space or at other companies to initially develop there products. As these startups and others begin to search for additional funding, absorption of lab space will steadily increase for 2,500 to 10,000 square feet options in the Greater Boston market. Venture capital (VC) funding in Massachusetts increased in the second quarter of 2011 to its highest quarter level since the recession began for a total of 89 deals worth $1.14 billion, according to CB Insights. The measured increase from the first two quarters of 2010 was over 17 percent for a total of $1.86 billion thus far in 2011. Cities that received the most funding in the second quarter included Cambridge with 27 deals worth $372 million, Boston with 23 deals worth $315 million, Lexington with 3 deals worth $124 million, Waltham with 9 deals worth $85 million, and Newton with 3 deals worth $63 million. For the overall nation, $7.8 billion dollars in VC funding was awarded to companies in the second quarter, an eight quarter high (Q2 2010 totaled only $5.9 million). Although a lot of this money was concentrated in the internet sector, the Healthcare industries (which typically require lab capabilities) accounted for over 50 percent of the total VC investment dollars in MA in the second quarter. BG Medicine ZipCar Inc. STAG Industrial Dunkin Donuts Carbonite Inc. Demandware Waltham Cambridge Boston Canton Boston Burlington Filed in Feb. Filed in Apr. Filed in Apr. Filed in July Yet to File Yet to File

Q2: Largest MA VC Deals

CSN Stores Tesaro Radius Merrimack Pharma Blueprint Medicines Boston Waltham Cambridge Cambridge Cambridge $165 MM $101 MM $91 MM $77 MM $40 MM

Source: www.cbinsights.com

Q2 2011 Venture Capital Share: Big Three

(in million)

Venture Capital Funding in MA

Mass Total $ Number of Deals

Deal Volume

10.1% $.5 MM

$1,200 $1,000

100 80 60 40

21.4% $1.1 MM 68.5% $3.7 MM

$800 $600 $400

20
$200
California Mass New York

$0

0
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011

Source: www.cbinsights.com

Research
Cambridge Lab
Shires Pullout Adds to Vacancy
The Cambridge lab market fell negative in the first half of 2011 with Mid Cambridge lab vacancy climbing to just under 20 percent. The total negative net absorption total for the quarter was 140,700 square feet, with over 157,00 square feet calculated in Mid Cambridge. Shire Pharmaceuticals, which has developed a campus out in Lexington, vacated its 190,000 square foot presence at 700 Main Street in the first half of 2011, which was the primary explanation for the decline in growth throughout Cambridge. East Cambridge grew incrementally in the second quarter with over 16,000 square feet of net absorption measured. West Cambridge exhibited no change in lab vacancy in the second quarter and thus had no impact on absorption. Compared to Cambridge office, the vacancy rate for lab product stood 50 percent higher due to major lab tenants in the market looking for built-to-suit options instead of occupying second-generation space. Office-to-lab conversions are also on the rise with 213,000 square feet at 400 Technology Square scheduled for a lab conversion. The total availability rate for lab space in Cambridge jumped to 20.2 percent and the sublease rate settled at 2.7 percent, both are above Q2 2010 levels. A majority of the sublease options are limited to East Cambridge product with 320 Bent Street and 300 Technology Square offering the largest opportunities; therefore, bumping the sublease rate for East Cambridge to 4.3 percent. Overall, significant future vacancies exist only at 400 Technology Square, thus alleviating any strong negative absorption pressure prior to Q2 2012

Q2 2011

Submarket Thermometer
Six Month Change in Asking Rate & Vacancy

Hot
Rents Climbing/Vacancy Falling

Warm
Rents Holding/Vacancy Decreases

East Cambridge Boston

Landlord Market
Equilibrium

Cold
Rents Decline/Vacancy Inches Up

Frozen
Slumping Rents/Vacancy Increases

Data Points
Net Absorption (YOY) (117,000) SF Direct Vacancy 13.9% Sublease Availability 2.7% Total Availability 20.2% Asking Rate $47.45/SF NNN

Recent Significant Leases

Net Absorption and Direct Vacancy

600,000 SF 450,000 SF 300,000 SF 150,000 SF 0 SF -150,000 SF -300,000 SF -450,000 SF -600,000 SF
2007 2008 2009 2010 2011 2012 Net Absorption - Projection Net Absorption Direct Vacancy

20.0% 17.5% 15.0% 12.5% 10.0% 7.5% 5.0% 2.5% 0.0%

Ariad Pharmaceuticals 26 Landsdown Street - 100,000 SF Mid Cambridge - Renewal Merrimack Pharmaceuticals One Kendall Square - 77,000 SF East Cambridge - Relocation Eqizyme 325 Vassar Street - 18,000 SF Mid Cambridge - Relocation Living Proof 301 Binney Street - 20,000 SF East Cambridge - Renewal/Expansion

Te n a n t M a r k e t

Mid Cambridge West Cambridge

Research
Lab Product: Cambridge
East Cambridge
Average Asking Rate (NNN) Sublease Availability (RSF)

Q2 2011

Mid Cambridge
Average Asking Rate (NNN) Sublease Availability (RSF)

$78.00 $65.00 $52.00 $39.00 $26.00 $13.00 $0.00

300,000 RSF 250,000 RSF 200,000 RSF 150,000 RSF 100,000 RSF 50,000 RSF 0 RSF

$60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00

450,000 RSF 375,000 RSF 300,000 RSF 225,000 RSF 150,000 RSF 75,000 RSF 0 RSF

Q4 2007

Q2 2008

Q4 2008

Q2 2009

Q4 2009

Q2 2010

Q4 2010

Q2 2011

Q4 2007

Q2 2008

Q4 2008

Q2 2009

Q4 2009

Q2 2010

Q4 2010

Q2 2011

Class A Cambridge Lab

Average Asking Rate (NNN) Sublease Availability (RSF)

$78.00 $65.00 $52.00 $39.00 $26.00 $13.00 $0.00

300,000 RSF 250,000 RSF 200,000 RSF 150,000 RSF 100,000 RSF 50,000 RSF 0 RSF

Although absorption numbers slipped in the second quarter, the average asking rate for Cambridge lab jumped to $47.45 per square foot NNN. A year ago the average asking rate was 6.2 percent lower at $44.68 per square foot NNN. Major rent growth was recorded in the Mid Cambridge Class A rate (up to $49.00 from $42.50 a year ago) and Class B East Cambridge (up to $39.75 from $13.00 a year ago). The increase was likely due to the quality of product now available and the forecast for lab tenant growth in those markets mentioned above. With only two options that exceed 100,000 square feet available for office tenants in Cambridge, the six that remain for lab give the message that there is an overabundance of supply in the market. Fortunately, breaking up these spaces into smaller segments could help spur absorption since there are only 2 options for tenants between 50,000 and 99,000 square feet. Even smaller options are limited for all of Cambridge lab furthering the likelihood that these large spaces will be occupied by a collection of tenants.

Q4 2007

Q2 2008

Q4 2008

Q2 2009

Q4 2009

Q2 2010

Q4 2010

Q2 2011

Largest Contiguous Blocks of Space

Building Address
650 E Kendall Street 400 Technology Square 700 Main Street 320 Bent Street 301 Binney Street 640 Memorial Drive 620 Memorial Drive 1030 Massachusetts Ave 197 Albany Street 21-27 Brighton Avenue 840 Memorial Drive

Contiguous Blocks by # of Options (Includes Boston)

Contiguous RSF Available
267,300 213,000 190,000 145,300 / 39,100 129,400 104,600 91,500 68,200 48,000 38,700 34,400

Submarket
East East Mid East East Mid Mid Mid Mid Boston Mid

Class
A A A A A A A A B B A

Building Size
280,000 213,000 190,000 184,400 417,300 225,400 91,500 82,100 48,000 195,000 64,000

Type
Direct Direct Direct Mixed Direct Direct Direct Direct Direct Direct Direct

6 1 1 15

14 14

25K - 49K 10K - 24K 5K - 9K

100K+ 75K - 99K 50K - 74K

(617) 951-4100 www.lpcboston.com

Research
Suburban Lab
Route 128 West Wins VC Money
Suburban lab tenants absorbed approximately 16,600 square feet in the second quarter of 2011 for a year-over-year positive total that exceeded 30,000 square feet. Route 128 West accounted for a majority of the positive news thus far in 2011 with the following relocations: Lincoln Labs new lease of 81,000 square feet to 3 Forbes Road in Lexington and T2 Systems 20,000 square foot relocation to the newly modified 101 Hartwell Avenue in Waltham. Waltham and Lexington have been on a roll in drawing growing lab tenants from the traditional Cambridge market and also received a significant share of the VC dollars awarded thus far to Massachusetts in 2011 (over 20 percent). The vacancy rate for suburban lab measured 14.3 percent at the end of the quarter, with the Route 128 West submarket slightly increasing to 12.9 percent due to LPC research survey adjustments. In the second quarter, sublease availability fell from 3.6 to 2.5 percent primarily due to the 30,000 square feet removed from 3 Forbes Road in Lexington. Although sublease availability fell in the second quarter, total availability increased to 18.8 percent from 16.8 percent a quarter ago. Overall, quality lab product along Route 128 will continue to draw premium lab tenants throughout 2011 since the average rent in Cambridge continued to climb higher ($47.45 per square foot versus $20.27 per square foot NNN).

Q2 2011

Submarket Thermometer
Six Month Change in Asking Rate & Vacancy

Hot
Rents Climbing/Vacancy Falling

Warm
Rents Holding/Vacancy Decreases

128 West Equilibrium

Cold
Rents Decline/Vacancy Inches Up

Frozen
Slumping Rents/Vacancy Increases

Data Points
Net Absorption (YOY) 31,100 SF Direct Vacancy 14.3% Sublease Availability 2.5% Total Availability 18.8% Asking Rate $20.27/SF NNN

Recent Significant Leases

Net Absorption and Direct Vacancy

400,000 SF 300,000 SF 200,000 SF 100,000 SF 0 SF -100,000 SF -200,000 SF -300,000 SF -400,000 SF
2007 2008 2009 2010 2011 2012 Net Absorption - Projection Net Absorption Direct Vacancy

Lincoln Labs (MIT)

20.0% 17.5% 15.0% 12.5%

3 Forbes Road, Lexington - 81,000 SF 128 West - Relocation

BioScale Inc.
4 Maguire Street, Lexington - 29,100 SF 128 West - Relocation

GTC Biotherapeutics
10.0% 7.5% 5.0% 2.5% 0.0%

175 Crossing Boulevard, Framingham 28,200 SF 495 Mass Pike - Renewal

T2 Systems
101 Hartwell Avenue, Waltham - 20,000 SF 128 West - Relocation

Te n a n t M a r k e t

495 West Northern Suburbs

Landlord Market

Research
Lab Product: Suburbs
Route 128
Average Asking Rate (NNN) Sublease Availability (RSF)

Q2 2011

Interstate 495
300,000 RSF 250,000 RSF 200,000 RSF 150,000 RSF 100,000 RSF 50,000 RSF 0 RSF
Average Asking Rate (NNN) Sublease Availability (RSF)

$45.00 $37.50 $30.00 $22.50 $15.00 $7.50 $0.00

$20.00 $17.50 $15.00 $12.50 $10.00 $7.50 $5.00

300,000 RSF 250,000 RSF 200,000 RSF 150,000 RSF 100,000 RSF 50,000 RSF 0 RSF

Q4 2007

Q2 2008

Q4 2008

Q2 2009

Q4 2009

Q2 2010

Q4 2010

Q2 2011

Q4 2007

Q2 2008

Q4 2008

Q2 2009

Q4 2009

Q2 2010

Q4 2010

Q2 2011

Cities with the Most Lab Product

Cambridge: 9 MM RSF

Boston: 3.6 MM RSF Lexington: 1 MM RSF Watertown: 0.7 MM RSF Waltham: 0.7 MM RSF

The average asking rate for suburban lab jumped in the second quarter to $19.95 per square foot NNN. Route 128 West remained above all other suburban lab markets at $29.63 per square foot NNN, which was an increase from last quarters $28.93 per square foot NNN. Due to the limited options (and therefore limited data points) marketed in the suburban Class A market, the average asking rate totaled only $20.79 per square foot NNN, compared to the Class B rate of $21.00. Suburban lab holds fewer options for large tenants than Cambridge, but more importantly, industry experts have pointed out that there remains a lack of space for tenants in the 500 to 3,000 square foot range. Typically backed by venture capital funding with risky credit, these tenants are finding it difficult to obtain accommodations other than bunking with larger lab tenants in a few empty offices.

Largest Contiguous Blocks of Space

Building Address
20 Walkup Drive 113 Hartwell Avenue 160 Dascomb Road 23 Frontage Road 30 Bearfoot Road 500 Arsenal Street 900 Middlesex Turnpike 40 Allied Drive 330 Nevada Street 610 Lincoln Street

Contiguous Blocks by # of Options

Contiguous RSF Available
113,100 103,000 70,600 64,000 62,000 47,500/44,600 37,500 34,200 33,800 33,100

City (Submarket)
Westboro (Mass Pike) Lexington (128 West) Andover (Northeast) Andover (Northeast) Northboro (Mass Pike) Watertown (128 West) Billerica (Route 3 North) Dedham (128 South) Newton (128 West) Waltham (128 West)

Class
B B B B B A B B B B

Building Size
113,100 105,700 123,500 64,000 62,000 92,100 75,000 34,200 45,000 94,100

Type
Direct Direct Direct Direct Sublease Direct Direct Direct Direct Direct

2 10

17

25K - 49K 10K - 24K 5K - 9K

100K+ 75K - 99K 50K - 74K

(617) 951-4100 www.lpcboston.com

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

Q2 2011

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

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

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

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

Arborway Imports 10,600 RSF 141 Middlesex Turnpike, Burlington Landlord Rep. - Rob Cronin

LPC in MA

LPC Thank s

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

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

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

L&B Realty for awarding Lincoln Property Companys management team with the 690 Canton Street assignment in Westwood. LPC welcomes L&B as a new client in the Boston market and congratulates them on their acquisition of the premium Class A asset.

Research

Q1 2011

T ER M I N O L O G Y ER LO
Asking Rental Rate: the dollar per square foot amount that is quoted by the entity that is representing the space being marketed. Deliveries: newly completed product that was recently under construction or renovation that are available for immediate occupancy. Direct: space that is marketed on behalf of the Landlord. Flex: product that is capable of hosting tenants that vary in their use of commercial real estate. Including office, lab, R&D, warehouse, manufacturing and distribution tenants. Free Rent: the time period the tenant does not have to pay any rent, which is agreed upon by the tenant and landlord during lease negotiations. Net Absorption: the change in direct vacancy over a measured time frame. Includes newly delivered product ready for occupancy, but does not include sublease. Tenant Improvements (T.I.): typically a dollar per square foot amount negotiated during the lease transaction that is paid to a tenant by the landlord, or sublandlord, for the means of improving the condition of the agreed upon space. Total Availability (A.K.A. Overall Availability): all space that is available for lease. Includes marketed occupied space, sublease, and product under construction that will be delivered within two (2) years. Vacant Available: all space that is currently available to lease and immediately occupy; therefore, space that is not hosting a tenant. Unoccupied space with a future commitment are excluded.

Sublease: space that is marketed on behalf of the current Tenant.

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

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

(617) 951-4100 www.lpcboston.com

Research
Market
BOSTON CAMBRIDGE East Cambridge Mid Cambridge West Cambridge SUBURBAN 128 West 495 West Northern Suburbs TOTAL

Q2 2011 - Lab
Total Sublease Available (sf)
12,730 243,206 237,806 5,400 144,676 10,664 83,666 50,346 400,612

Rentable Square Feet (RSF)

3,615,335 9,095,042 5,584,309 2,897,092 613,641 5,719,897 2,755,413 1,107,269 1,792,075 18,430,274

Direct Vacancy (sf)

156,930 1,268,274 658,690 574,491 35,093 818,079 355,939 205,716 222,184 2,243,283

%
4.3% 13.9% 11.8% 19.8% 5.7% 14.3% 12.9% 18.6% 12.4% 12.2%

%
0.4% 2.7% 4.3% 0.2% 0.0% 2.5% 0.4% 7.6% 2.8% 2.2%

Total Availability (sf)

169,300 1,834,414 1,092,382 706,939 35,093 1,072,718 406,604 289,382 336,530 3,076,432

%
4.7% 20.2% 19.6% 24.4% 5.7% 18.8% 14.8% 26.1% 18.8% 16.7%

Q2 2011 YOY Net Average Absorption (sf) Absorption (sf) Asking Rate NNN
(140,760) 16,900 (157,660) 16,617 50,932 (26,348) (7,967) (124,143) (38,088) (117,028) 52,193 (147,328) (21,893) 31,093 64,206 (49,173) 50,300 (124,023) $49.67 $47.45 $51.55 $44.83 $$20.27 $29.63 $10.23 $17.39 $39.81

CLASS A
BOSTON CAMBRIDGE East Cambridge Mid Cambridge West Cambridge SUBURBAN 128 West 495 West Northern Suburbs CLASS A TOTAL 2,560,819 7,263,457 4,906,797 2,220,160 136,500 2,990,894 1,696,544 619,210 675,140 12,815,170 55,924 1,021,260 615,283 405,977 187,893 29,823 27,671 130,399 1,265,077 2.2% 14.1% 12.5% 18.3% 0.0% 6.3% 1.8% 4.5% 19.3% 9.9% 11,730 92,552 92,552 82,662 10,664 21,652 50,346 186,944 0.5% 1.3% 1.9% 0.0% 0.0% 2.8% 0.6% 3.5% 7.5% 1.5% 67,294 1,436,746 903,721 533,025 285,758 55,690 49,323 180,745 1,789,798 2.6% 19.8% 18.4% 24.0% 0.0% 9.6% 3.3% 8.0% 26.8% 14.0% (177,137) 8,806 (185,943) (4,315) 3,652 (7,967) (181,452) (46) (28,308) 87,270 (115,578) (38,406) 8,813 (19,173) (28,046) (66,760) $18.41 $49.63 $90.00 $52.32 $54.50 $49.00 $$20.79 $27.67

CLASS B
BOSTON CAMBRIDGE East Cambridge Mid Cambridge West Cambridge SUBURBAN 128 West 495 West Northern Suburbs CLASS B TOTAL 1,054,516 1,831,585 677,512 676,932 477,141 2,729,003 1,058,869 488,059 1,116,935 5,615,104 101,006 247,014 43,407 168,514 35,093 630,186 326,116 178,045 91,785 978,206 9.6% 13.5% 6.4% 24.9% 7.4% 23.1% 30.8% 36.5% 8.2% 17.4% 1,000 150,654 145,254 5,400 62,014 62,014 213,668 0.1% 8.2% 21.4% 0.8% 0.0% 2.3% 0.0% 12.7% 0.0% 3.8% 102,006 397,668 188,661 173,914 35,093 786,960 350,914 240,059 155,785 1,286,634 9.7% 21.7% 27.8% 25.7% 7.4% 28.8% 33.1% 49.2% 13.9% 22.9% 36,377 8,094 28,283 20,932 50,932 (30,000) 57,309 (38,042) (88,720) (35,077) (31,750) (21,893) 69,499 55,393 (30,000) 78,346 (57,263) $29.50 $35.54 $39.75 $41.86 $21.00 $29.94 $12.33 $16.20 $25.15

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