Q1-2018-OfficeReport

OFFICE STATISTICS CAMBRIDGE

CAMBRIDGE

TOTAL INVENTORY (SF)

TOTAL VACANT (SF)

TOTAL VACANCY RATE

Q1 NET ABSORPTION (SF)

YTD NET ABSORPTION (SF)

Class A

7,036,443

320,548

4.6%

(13,088)

(13,088)

Class B

3,168,145

12,884

0.4%

24,518

24,518

CLASS A & B TOTAL

10,204,588

333,432

3.3%

11,430

11,430

Vacanct SF VACANCT SF Vacanct SF

TRENDS • Cambridge remains one of Boston’s tightest and most expensive office markets. Vacancies ended the first quarter near historic lows as the market absorbed roughly 11,000 square feet. MIT took occupancy of nearly 48,000 square feet at 105 Broadway, and Air Inc. moved into 19,207 square feet at 675 Massachusetts Ave. In West Cambridge, however, office vacancies climbed to 8.7% as negative absorption surpassed 50,000 square feet for the quarter. QuickBase accounted for the majority of this activity; vacating more than 30,000 square feet at 150 Cambridgepark Drive. Persistent demand for commercial space in Cambridge will keep fundamentals at or near current lows in the foreseeable future; leaving landlords with a clear upper hand. • Cambridge Crossing landed its first large office user this quarter. In another suburban-to-urban relocation, Philips NV is planning to move its North American headquarters from Andover to East Cambridge; bringing along roughly 2,000 employees. In 2020, the firm will occupy more than 300,000 square feet at the first phase of the Cambridge Crossing development. The catalyst for this deal was proximity to the booming life science market in Kendall Square, where the firm already employs 200 researchers. • While companies continue to move in from the suburbs, several home-grown Cambridge tenants are expanding. Cambridge Innovation Center is adding another location at 255 Main Street to accommodate the growing demand for co-working and shared office space. The startup hub is taking 92,500 square feet formerly occupied by Microsoft — bringing its Kendall Square footprint to 300,000 square feet. MIT, Draper Labs, Broad Institute, and CarGurus are growing here as well. • Nearly 80% of the 917,000 square feet of office space currently under construction in East Cambridge is spoken for. Work continues on Akamai’s new headquarters at 145 Broadway, and Philips NV and CarGurus both executed leases at new developments this quarter. While a handful of projects are slated to break ground this year, including the 425,000-square-foot 314 Main Street and the 430,000-square-foot courthouse redevelopment, demand for product in Cambridge seems insatiable. Several of the proposed developments are also being marketed to both office and lab users; creating even more competition for this market’s limited office inventory. • Limited availabilities and few rent observations have created some volatility in Cambridge’s recent rent data, which is not indicative of market health. Asking rents in East Cambridge and Mid Cambridge are among the highest in the metro area, and lease rates for the new construction, which are not included in current calculations, are well north of $90/SF gross.

1,200

1,200

1,000

1,000

800

800

600

600

SF (000s)

SF (000s) 400

400

200

200

0

0

2013

2014

2015

2016

2017

2018

2013

2014

2015

2016

2017

2018

Direct

Sublease

Direct

Sublease

NET ABSORPTION AND ASKING RENT

300

$80

300

$80

$70

200

$70

200

$60

$60

100

$50

100

$50

0

$40

0

$40

SF (000s)

$30

SF (000s) -100

$30

-100

$20

$20

-200

$10

-200

$10

-300

$0

-300

$0

2014

2015

2016

2017

2014

2015

2016

2017

Net Absorption

Asking Rent

Net Absorption

Asking Rent

NOTABLE TRANSACTIONS Notable Transactions

Philips NA

CIC

CarGurus

Matrix Partners

EIU

25K SF

50K SF

75K SF

100K SF

350K SF

East Cambridge

3