Suburban Market Perspective 2013

Presented by the Colliers International Boston Suburban Brokerage Team on September 4, 2013.

Transcript

1. Suburban Market Perspective Wednesday, September 4, 2013
2. Suburban Market Perspective WELCOME James L. Elcock
4. Agenda I. North Market | Greg Klemmer II. West Market | John Carroll, III III. South Market | Caleb Hudak IV. Cambridge Market | Ben Coffin V. Investment Market | Tony Hayes VI. Retail Market | Todd Alexander VII. Q&A Session
5. Suburban Market Perspective North Market Greg Klemmer
6. Office Deals | 1.8M SF 35 Village Road, Middleton 43,000 SF CLASS A $20.00 – $25.00 gross CLASS B $14.00 - $17.50 gross 900 Chelmsford Street, Lowell 300,000 SF 600 Technology Park Drive, Billerica 56,000 SF 200 Ballardvale Street, Wilmington 49,000 SF 13 Centennial Drive, Peabody 18,000 SF 800 Federal Street, Andover 235,000 SF
7. Flex Deals | 790,000 SF 18 Commercial Way, Woburn 18,400 SF One Riverside Drive, Andover 60,700 SF 50 Dunham Road, Beverly 68,000 SF CLASS A $9.50 - $11.50 NNN CLASS B $7.00 - $8.50 NNN 749 Middlesex Turnpike, Billerica 47,000 SF 500 Research Drive, Wilmington 58,000 SF 16 Elizabeth Road, Chelmsford 91,500 SF
8. 72 Salem Road, Billerica 274,000 SF 235 Andover Street, Wilmington 40,000 SF Industrial Deals | 1.05M SF 200 Fallon Road, Stoneham 62,000 SF 330 Lynnway, Lynn 203,000 SF CLASS A $6.50 - $8.50 NNN CLASS B $4.50 - $5.75 NNN 300 Jubilee Drive, Peabody 56,000 SF 300 Jubilee Drive, Peabody 35,000 SF
9. Tenants in the Market 150,000 SF 300,000 SF 70,000 SF 50,000 SF 50,000 SF 200,000 SF 100,000 SF 180,000 SF 40,000 SF 250,000 SF 45,000 SF 15,000 SF 80,000 SF 120,000 SF 30,000 SF 40,000 SF
10. Pretenders vs. Contenders 0 2 4 6 8 10 12 14 16 OFFICE (15K) FLEX (30K) WAREHOUSE (30K) MANUFACTURING (100K) 16+ 11 7 12
11. Pretenders vs. Contenders BUILDING TYPE LOCATION AVAILABLE SF TIMING     Initial Search Parameters:
12. Pretenders vs. Contenders AMENITIES UPDATED INFRASTRUCTURE FUNCTIONALITY FINANCIAL STRENGTH Additional Requirements:
13. Pretenders vs. Contenders SUBSTANTIAL VACANCY NUMEROUS OPTIONS
14. If you build it, they will come…
15. Successful Proactive Developments 800 Federal Street, Andover 159,000 SF 50 Dunham Road, Beverly 103,000 SF Riverview Technology Park, Tewksbury 574,000 SF 35 Village Road, Middleton 226,000 SF 235 Andover Street, Wilmington 28,000 SF 23 Frontage Road, Andover 64,000 SF
16. Be a… not a…
17. Suburban Market Perspective West Market John Carroll, III
18. Presentation Coverage 128 West Supply: 52,134,652 SF Vacancy: 15.7% 495 West Supply: 18,347,382 SF Vacancy: 26.8%
19. Boston Metropolitan Employment Stats 2,399 2,559 2,300 2,350 2,400 2,450 2,500 2,550 2,600 # Employees (000s) Year (July stats) (Information obtained from www.bls.gov (Bureau of Labor Statistics) – Boston Metropolitan Non-Farm Statistics
20. Speeds of the Market 128 495 25
21. Who is growing in 128 West (central)? 30K+ SF 10K – 30K SF Up to 10K SF + 39K + 150K + 105K + 70K + 56K + 175K
22. Who is growing in 128 West (central)? 30K+ SF 10K – 30K SF Up to 10K SF + 39K + 150K + 105K + 70K + 56K + 175K
23. + 31K Who is growing in 128 West (northern)? 30K+ SF 10K – 30K SF Up to 10K SF + 39K + 56K + 36K + 35K + 33K
24. Who is growing in 495 West? 30K+ SF 10K – 30K SF Up to 10K SF + 500K + 350K + 50K + 30K
25. The Domino Effect
26. The Domino Effect
27. 24.63% 35.99% 39.37% Dissecting Office Vacancy 15.99% 19.24% 32.97% 31.80% 49.21% 15.69% 14.97% 20.13% Vacancy = 17.21% (1,981,624 SF) Vacancy = 14.52% (974,291 SF) Vacancy = 29.53% (2,844,359) = 100K+ SF = 50-100K SF = 20-50K SF = <20K SF
28. 80 William Street Wellesley 36,000 SF Low $40s/SF Premier Asset Bay Colony Waltham 32,000 SF Mid $30s/SF Premier Asset Current New Deals – 128 West (central) Center 128 Needham 280,000 SF Mid $40s/SF Build-to-Suit
29. 65 Network Drive Burlington 14,000 SF Low $30s/SF Trophy Asset 30 Corporate Drive Burlington 27,000 SF High $20s/SF High Quality Asset 3 Burlington Woods Burlington 13,000 SF High $20s/SF High Quality Asset Current New Deals – 128 West (northern)
30. 100 Campus Drive Marlborough 107,000 SF (renewal) Mid $20s/SF Premier Asset 1700 West Park Drive Westborough 11,000 SF Low $20s/SF Traditional Class A Forest Park Marlborough 200,000 SF Low $30s/SF BTS/Renovation Current New Deals – 495 West
31. Select Successful Projects - Waltham Bay Colony Corporate Center Q2 2012 Vacancy 35.8% Q2 2013 Vacancy 23.8%
32. Select Successful Projects - Waltham Stony Brook Office Park Q2 2012 Vacancy 24.4% Q2 2013 Vacancy 4.0%
33. Select Successful Projects - Burlington 1 & 3 Burlington Woods Q2 2012 Vacancy 11.1% Q2 2013 Vacancy 6.2% sold to
34. Select Successful Projects - Boroughs Q2 2012 Vacancy 16.6% Q2 2013 Vacancy 9.8% Westborough Office Park
35. Suburban Market Perspective South Market Caleb Hudak
36. Summary › Market Statistics › Trends › North Quincy › Development › Active Tenants › Industrial › Conclusions
37. Market Statistics Slow
38. Trends › Limited Tech Companies = Limited Dynamic Growth › Rent Growth  Class A + and Small Suites › Large Companies Renewing: 76,528 SF 26,664 SF 132,160 SF 40,000 SF 175,000 SF* * LOI 25,000 SF 242,000 SF 251,000 SF › Medical office continues to expand: › 143 Longwater Drive, Norwell › Build to Suit for South Shore Medical Center › September 16, 2013 seeing patients › 80,000 SF …but steady
39. Trends: Braintree/Quincy Split › 3 Batterymarch Park, Quincy › 1 Adams Place, Braintree …steady Cannibalistic Market
40. Trends: User Sales $77/SF 39-41 Brooks Drive, Braintree $57/SF 75 Campanelli Parkway, Stoughton $47/SF 1 Constitution Way, Foxborough $58/SF 240 Forbes Boulevard, Mansfield $77/SF 101 Campanelli Drive, Braintree …steady
41. North Quincy (Milton) › Supply: 1.33M SF (9 buildings) › Vacancy: 45.1% $5 $10 $15 $20 $25 $30 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Weighted Asking Rents No Quincy/Milton Braintree/Quincy 0% 10% 20% 30% 40% 50% 60% Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Comparative Vacancy Rates No Quincy/Milton Braintree/Quincy …steady $13,900,000 SF ($115/SF) 1/1/2013 › Turning Point: 150 Newport Avenue
42. North Quincy › Low basis: $42/SF › 7 miles from Boston › Served by public transportation › Only large block opportunity in North Quincy – 358,000 SF …steady
43. = Office = Industrial Tenants in the Market 200,000 SF 100,000 SF 100,000 SF 150,000 SF 175,000 SF 65,000 SF Collecto, Inc. 25,000 SF 25,000 SF 71,000 SF 150,000 SF 50,000 SF 45,000 SF 50,000 SF 500,000 SF Confidential Company 175,000 SF 150,000 SF 225,000 SF 110,000 SF 60,000 SF 300,000 SF …steady
44. = Office = Industrial Tenants in the Market 200,000 SF 100,000 SF 100,000 SF 150,000 SF 175,000 SF 65,000 SF Collecto, Inc. 25,000 SF 25,000 SF 71,000 SF 150,000 SF 50,000 SF 45,000 SF 50,000 SF 500,000 SF Confidential Company 175,000 SF 150,000 SF 225,000 SF 110,000 SF 60,000 SF 300,000 SF ??? Build to Suit: University Station, Westwood Renewal: 130 Royall Street, Canton 175,000 SF …steady
45. Industrial Space › Cabot Business Park, Mansfield Market Size – 59,261,013 SF Vacancy – 17.6% Recent Absorption: › 83,600 SF (Q2 2013) › 332,300 SF (YTD) › 1,434,300 SF (Last 24 mos.) › 1,956,300 SF (Last 36 mos.) Market Drivers: › Tire / Auto Companies › Cold Storage What’s Next: › Medical Marijuana??? …steady
46. Heritage Landing - North Quincy University Station - Westwood Assinippi Park - Norwell Limited Quality Industrial Summary
47. …wins the race?
48. Suburban Market Perspective Cambridge Market Ben Coffin
49. The Cambridge Office Market Supply: 6,958,336 SF Vacancy: 8.1%* Supply: 1,844,059 SF Vacancy: 0.2%* Supply: 2,005,906 SF Vacancy: 16.9%* *Vacancy calculations include sublease space.
50. DOT COMs “1999 was the year that we learned to correctly pronounce Akamai, the year we geared up for e-commerce and the year we considering ending “.com” to our company names. In Cambridge, 1999 was a year of unprecedented low vacancy rates, persistent citizen and government attempts to slow new development, and whirlwind transaction activity fueled by the ongoing expansion of biotech firms and by the birth and explosion of what I like to call the e-tech industries. Strong tenant demand from these emerging industries and a limited product supply caused us to close out the year with a vacancy rate of 0.8%. Despite this very severe vacancy environment, transaction activity in Cambridge’s 13.5 million square foot market was exceptionally strong…” ~ Joe Flaherty (2/3/00)
51. 675 Massachusetts Ave 45,500 SF 1 Cambridge Center 113,000 SF Largest Office Transactions - 2010 5 Cambridge Center 83,300 SF 1 Main Street 58,500 SF 5 Cambridge Center 69,500 SF
52. Largest Office Transactions - 2011 4 Cambridge Center 80,000 SF 225 Binney Street 307,000 SF 1 Rogers Street 160,000 SF 3 Cambridge Center 60,000 SF 17 Cambridge Center 190,000 SF 1 Broadway 146,000 SF
53. Largest Office Transactions - 2012 Multiple Locations 48,000 SF 101 Main Street 105,000 SF 101 Main Street 53,000 SF 1 Hampshire Street 47,000 SF 3, 4, & 5 Cambridge Center 300,000 SF 1 Main Street 63,142 SF
54. One Kendall Square 50,000 SF 675 Massachusetts Ave 27,000 SF Largest Office Transactions - 2013 1 Broadway 3,097 SF 101 Main Street 23,500 SF 141 Portland Street 32,000 SF 25 First Street 117,000 SF 150 CambridgePark Dr. 61,000 SF 1 Charles Park & 1 Main St. 53,000 SF 141 Portland Street 32,000 SF
55. Kendall Square 1.6% Vacancy
56. 35 Cambridge Park Drive 135,000 SF Lack of Large Blocks 1.6% Vacancy 2 Canal Park 193,000 SF 10 Canal Park 110,000 SF
57. Cambridge Office Asking Rents 1 & 101 Main St. $63.00/SF 14.5% Class A 215 First St. $48.00/SF 30% Class B 141 Portland St. $55.00/SF 28% Class B+ (Percentages reflect rent increases since January 2012)
58. Cambridge Office Asking Rents 215 First St. $48.00/SF 30% Class B 25 FIRST STREET CAMBRIDGE 118,561 RSF 7 years $49.00/RSF gross $20.13/RSF
59. T Alewife Availability 150 CPD Equity Office Availability: 61,645 SF $40.00/SF 125 CPD Equity Office Availability: 28,326 SF $40.00/SF 100 CPD Transatlantic Availability: 44,074 SF $35.00/SF One Alewife Center Brookwood Financial Availability: 15,043 SF $32.00/SF 10 Fawcett Street Griffith Properties Availability: 21,197 SF $35.00/SF 35 CPD Schochet Associates Sublease Availability: 135,000 SF $35.00/SF
60. T Alewife Plans
61. Assembly Row Assembly Row Mixed Use Project: • 1.75 million SF • Office, Lab, Residential, Retail • Live, Work, Play environment • New Orange Line T stop on site
62. Owner: Available SF: 60,000 SF 450 Kendall Street Cambridge Development Sites
63. Cambridge Development Sites Owner: Available SF: 500,000 SF Middlesex Courthouse
64. Cambridge Development Sites Owner: Available SF: 2 million+ SF NorthPoint
65. Cambridge Development Sites Owner: 50 Binney Street: 549,000 SF 100 Binney Street: 416,000 SF Binney Street
66. Cambridge Development Sites Owner: Available SF: 980,000 SF MIT Kendall Square Initiative
67. Owner: Available SF: 260,000 SF 610 Main Street North Cambridge Development Sites
68. One Kendall Square, 600 50,000 SF ~ 6 years Low $50s/SF avg. ~ $50/SF TIs Lab Conversion
69. One Kendall Square, 600 50,000 SF ~ 6 years Low $50s/SF avg. ~ $50/SF TIs Lab Conversion
70. Trends • Overall Cambridge office market will continue to tighten • On track for a RECORD year of office absorption • Select laboratory landlords may convert lab space into office • Speculative office development will be well received by Cambridge tenants
71. Suburban Market Perspective Investment Market Tony Hayes
72. Headlines June 21, 2013 Campanelli and Trigate Capital purchase Heritage Landing for $16.3M March 14, 2013 Newton’s Riverside Center to fetch $200M June 18, 2013 Equity Office sells New England Executive Park for $216M
73. Headline Year for Sales Activity $0 $200,000,000 $400,000,000 $600,000,000 $800,000,000 $1,000,000,000 $1,200,000,000 $1,400,000,000 Cambridge Suburban YTD 2012 September 2012
74. Headline Year for Sales Activity 53% Increase Year over Year 10% Increase over 2012 Total
75. Equity: Who is chasing these deals? Private Investor $623,655,000 User $289,800,000 Public REIT $147,400,000 Private REIT $234,000,000 Pension Manager $124,100,000
76. Debt Availability: The Return of CMBS Debt Originations $- $50 $100 $150 $200 $250 2009 2010 2011 2012 2013 Banks Life Insurance CMBS $0
77. Debt Availability: The Return of CMBS Debt Originations $- $50 $100 $150 $200 $250 2009 2010 2011 2012 2013 Banks Life Insurance CMBS $0
78. 128 Northwest Deals Seller: Blackstone/EOP $77,000,000 ($270/SF) 6.7% Cap Buyer: TA Realty 25 Mall Road 25 Burlington Mall Road, Burlington 285,000 SF Seller: Behringer Harvard $69,600,000 ($256/SF) 6.0% Cap Buyer: Piedmont REIT Nokia Headquarters 5 Wayside Drive, Burlington 271,500 SF Seller: Bentall Kennedy/MEPT $110,000,000 ($226/SF) Buyer: Davis/Principal Burlington Centre Corporate Drive, Burlington 487,000 SF Seller: Blackstone/EOP $216,000,000 ($209/SF) 6.3% Cap Buyer: Charles River/ National Development New England Executive Park Executive Park Drive, Burlington 1,032,000 SF
79. 128 Central Deals Seller: Equus Capital $47,000,000 ($158/SF) 7.5% Est. Year 2 Cap Buyer: TA Realty Totten Pond Office Center 400 Totten Pond Road, Waltham 296,600 SF Seller: TA Realty $34,000,000 ($197/SF) Buyer: Taurus One Newton Place 275 Washington Street, Newton 172,700 SF Seller: John Hancock $34,500,000 ($171/SF) 6.4% Going-in-Cap Buyer: Rockwood/Griffith Waltham Place 266 – 25 Second Avenue, Waltham 201,500 SF Seller: Saracen Properties $68,000,000 ($154/SF) Buyer: Rubenstein Partners CenterPoint Office Park Seyon Street, Waltham 441,900 SF Seller: Blackstone/EOP $197,300,000 ($387/SF) 5.8% Cap Buyer: Hines Global REIT Riverside Center 275 Grove Street, Newton 510,000 SF
80. 128 South Deals Seller: Normandy $13,975,000 ($115/SF) Buyer: Foxrock Properties Allan Forbes Building 150 Newport Avenue, Quincy 121,000 SF Seller: Commonwealth REIT $16,300,000 ($46/SF) Buyer: Campanelli Heritage Landing 1 Heritage Drive, Quincy 358,000 SF Seller: Campanelli $10,500,000 ($105/SF) Buyer: Foxrock Properties Weymouth Woods 97 Libbey Industrial Parkway, Weymouth 100,000 SF Seller: Dinosaur/Grossman $17,200,000 ($139/SF) 8.5% Buyer: Albany Road Braintree Executive Park 100 Grossman Drive, Braintree 124,900 SF
81. Seller: RREEF $14,500,000 ($134/SF) Buyer: Marcus Partners Point West Place 111 Speen Street, Framingham 108,000 SF Other Suburban Deals Seller: Injured Workers Pharmacy $6,200,000 ($52/SF) Buyer: Grander Capital Partners Woodland Park 300 Federal Street, Andover 120,0000 SF Seller: Synergy Investment $31,300,000 ($246/SF) 6.8% Cap Buyer: Griffith Properties Fresh Pond Square 10 Fawcett Street, Cambridge 127,000 SF Seller: SixCam Realty Trust $52,000,000 ($523/SF) Buyer: Biomed Realty Trust Broad Institute 320 Charles Street, Cambridge 99,500 SF Seller: Foulger-Pratt $33,430,000 ($174/SF) Buyer: Bulgroup Properties, LP InnerNet Center 200 Innerbelt Road, Somerville 192,000 SF
82. NNN Deals Seller: Dividend Capital $25,800,000 ($195/SF) 6.8% Buyer: WP Carey Arbella Headquarters 1100 Crown Colony, Quincy 132,000 SF Seller: Sycamore Partners $36,700,000 ($51/SF) Buyer: American Realty Talbots Distribution Center 175 Kenneth Welch Drive, Lakeville 722,000 SF Seller: Taurus/Divco Buyer: Tritower Kiva Systems 300 Riverpark Drive, North Reading 208,000 SF $32,250,000 ($155/SF)
83. Yields and Pricing Today 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% Riverside Center 25 Mall Road Totten Pond Office Center* Estimated Year 2 Cap Braintree Executive Park $387 psf $270 psf $158 psf $139 psf
84. Where do we go from here? Cap Rates: › Pent up capital pursuing deals › Attractive relative income returns › Limited supply of quality offerings › Relatively immune from minor increases in rates Price PSF: › Discount to replacement cost › Upside in rental rates to grow income › Most constrained markets from a new development perspective Route 128 NW/Central and Cambridge 1,201,308,578 Cap Rates: › Limited depth of capital pool › Debt sensitive deals at whim of capital markets › Supply/Demand disconnect Price PSF: › Steep discount to replacement cost can compel transactions › Inability to underwrite significant rent growth › Oversupply and potential oversupply creates value ceiling Other Suburban Markets
85. Conclusions › Banner Year, with record sales volume on tap › Rising Tide hasn’t lifted all boats › Close-in suburbs lead way in transaction and sales volumes › Ample, diverse capital base continues to pursue suburban will continue to pursue deals in the market › Diverse market with full range of deal types from A+ core, to opportunistic redevelopment
86. Suburban Market Perspective Retail Market Todd Alexander
87. Suburban Non-mall Retail Rents (NNN) 3 213 24 3 Worcester Boston 3 Woburn Franklin Framingham Cambridge Waltham 2012 $40 - $65 Burlington $40 - $70 3.6% 2012 $25 - $45 2012 $25 - $45 Natick/Framingham $25 - $50 4.0% Peabody $30 - $45 3.0% 2012 $30 - $60 Braintree $30 - $60 3.8%
88. Retailer Update
89. New & Active Tenants in the Market
90. Restaurant Tenants in the Market
91. Retailers Closing
92. Development Updates Market Street, Lynnfield 400,000 SF 3rd Avenue, Burlington 300,000 SF University Station, Westwood 750,000 SF 1265 Main Street, Waltham 280,000 SF
93. Trends Rents Vacancy Developments
94. Opportunities – Redevelopments White City - Shrewsbury
95. Other Opportunities New England Executive Park - Burlington The Stack / CityPoint - Waltham
96. Forecast Overall Activity
97. Suburban Market Perspective Q&A Session