<PAGE>

                                                                   EXHIBIT 10.17

                              GUARANTY OF PAYMENT


          GUARANTY OF PAYMENT (this "Guaranty"), made as of October 24, 2000,
                                     --------
between CABOT INDUSTRIAL TRUST, a Maryland real estate investment trust, having
an address at Two Center Plaza, Suite 200, Boston, Massachusetts 02108-1906
("Guarantor"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking
  ---------
corporation, having an office at 60 Wall Street, New York, New York 10260, as
agent ("Agent") for the banks (the "Banks") listed on the signature pages of the
        -----                       -----
Revolving Credit Agreement (as the same may be amended, modified, supplemented
or restated, the "Credit Agreement"), dated as of the date hereof, among Cabot
                  ----------------
Industrial Properties, L.P., a Delaware limited partnership ("Borrower"), Agent,
                                                              --------
as Bank and as Lead Agent for the Banks, The Chase Manhattan Bank, as
Syndication Agent, Fleet National Bank, as Documentation Agent, and the Banks
parties thereto.

                             W I T N E S S E T H:
                             - - - - - - - - - -

          WHEREAS, the Banks have agreed to make loans to Borrower in the
aggregate principal amount not to exceed Three Hundred Twenty-Five Million
Dollars ($325,000,000), as such amount may be increased pursuant Section 9.14 of
the Credit Agreement (hereinafter collectively referred to as the "Loans");
                                                                   -----

          WHEREAS, the Loans will be evidenced by promissory notes (the "Notes")
                                                                         -----
of Borrower made to each of the Banks in accordance with the terms of the Credit
Agreement;

          WHEREAS, the Credit Agreement and the Notes and any other documents
executed in connection therewith are hereinafter collectively referred to as the
"Loan Documents";
 --------------

          WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings ascribed there-to in the Credit Agreement;

          WHEREAS, Guarantor is the sole general partner of Borrower; and

          WHEREAS, in order further to induce the Agent and the Banks to enter
into the Loan Documents, Guarantor has agreed to enter into this Guaranty.
<PAGE>

          NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

          1.  Guarantor, on behalf of itself and its successors and assigns,
hereby irrevocably, absolutely and unconditionally guaranties the full and
punctual payment when due, whether at stated maturity or otherwise, of all
Obligations of Borrower now or hereafter existing under the Notes and the Credit
Agreement, for principal and/or interest as well as any and all other amounts
due thereunder, including, without limitation, all indemnity obligations of
Borrower thereunder, and any and all reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees and disbursements) incurred by
the Agent or the Banks in enforcing its rights under this Guaranty (all of the
foregoing obligations being the "Guaranteed Obligations").
                                 ----------------------

          2.  It is agreed that the Guaranteed Obligations of Guarantor
hereunder are primary and this Guaranty shall be enforceable against Guarantor
and its successors and assigns without the necessity for any suit or proceeding
of any kind or nature whatsoever brought by the Agent against Borrower or its
respective successors or assigns or any other party or against any security for
the payment and performance of the Guaranteed Obligations and without the
necessity of any notice of non-payment or non-observance or of any notice of
acceptance of this Guaranty or of any notice or demand to which Guarantor might
otherwise be entitled (including, without limitation, diligence, presentment,
notice of maturity, extension of time, change in nature or form of the
Guaranteed Obligations, acceptance of further security, release of further
security, imposition or agreement arrived at as to the amount of or the terms of
the Guaranteed Obligations, notice of adverse change in Borrower's financial
condition and any other fact which might materially increase the risk to
Guarantor), all of which Guarantor hereby expressly waives; and Guarantor hereby
expressly agrees that the validity of this Guaranty and the obligations of
Guarantor hereunder shall in no way be terminated, affected, diminished,
modified or impaired by reason of the assertion of or the failure to assert by
the Agent against Borrower or its respective successors or assigns, any of the
rights or remedies reserved to the Agent pursuant to the provisions of the Loan
Documents.  Guarantor agrees that any notice or directive given at any time to
the Agent which is inconsistent with the waiver in the immediately preceding
sentence shall be void and may be ignored by the Agent, and, in addition, may
not be pleaded or introduced as evidence in any litigation relating to this
Guaranty for the reason that such pleading or introduction would be at variance
with the written

                                       2
<PAGE>

terms of this Guaranty, unless the Agent has specifically agreed otherwise in a
writing, signed by a duly authorized officer. Guarantor specifically
acknowledges and agrees that the foregoing waivers are of the essence of this
transaction and that, but for this Guaranty and such waivers, the Agent would
decline to execute the Loan Documents.

          3.  Guarantor waives, and covenants and agrees that it will not at any
time insist upon, plead or in any manner whatsoever claim or take the benefit or
advantage of, any and all appraisal, valuation, stay, extension, marshaling-of-
assets or redemption laws, or right of homestead or exemption, whether now or at
any time hereafter in force, which may delay, prevent or otherwise affect the
performance by Guarantor of its obligations under, or the enforcement by the
Agent of, this Guaranty. Guarantor further covenants and agrees not to set up or
claim any defense, counterclaim, offset, set-off or other objection of any kind
to any action, suit or proceeding in law, equity or otherwise, or to any demand
or claim that may be instituted or made by the Agent other than the defense of
the actual timely payment and performance by Borrower of the Guaranteed
Obligations; provided, however, that the foregoing shall not be deemed a waiver
             --------  -------
of Guarantor's right to assert any compulsory counterclaim, if such counterclaim
is compelled under local law or rule of procedure, nor shall the foregoing be
deemed a waiver of Guarantor's right to assert any claim that would constitute a
defense, setoff, counterclaim or crossclaim of any nature whatsoever against
Agent or any Bank in any separate action or proceeding.  Guarantor represents,
warrants and agrees that, as of the date hereof, its obligations under this
Guaranty are not subject to any counterclaims, offsets or defenses against the
Agent of any kind.

          4.  The provisions of this Guaranty are for the benefit of the Agent
and the Banks and their successors and permitted assigns, and nothing herein
contained shall impair as between Borrower and the Agent and the Banks the
obligations of Borrower under the Loan Documents.

          5.  This Guaranty shall be a continuing, unconditional and absolute
guaranty and the liability of Guarantor hereunder shall in no way be terminated,
affected, modified, impaired or diminished by reason of the happening, from time
to time, of any of the following, although without notice or the further consent
of Guarantor:

          (a) any assignment, amendment, modification or waiver of or change in
     any of

                                       3
<PAGE>

     the terms, covenants, conditions or provisions of any of the Guaranteed
     Obligations or the Loan Documents or the invalidity or unenforceability of
     any of the foregoing; or

          (b) any extension of time that may be granted by the Agent and/or any
     Bank to Borrower, any guarantor, or their respective successors or assigns,
     heirs, executors, administrators or personal representatives; or

          (c) any action which the Agent may take or fail to take under or in
     respect of any of the Loan Documents or by reason of any waiver or, or
     failure to enforce any of the rights, remedies, powers or privileges
     available to the Agent under this Guaranty or available to the Agent at
     law, equity or otherwise, or any action on the part of the Agent granting
     indulgence or extension in any form whatsoever; or

          (d) any sale, exchange, release, or other disposition of any property
     pledged, mortgaged or conveyed, or any property in which the Agent and/or
     the Banks have been granted a lien or security interest to secure any
     indebtedness of Borrower to the Agent and/or the Banks; or

          (e) any release of any Person who may be liable in any manner for the
     payment and collection of any amounts owed by Borrower to the Agent and/or
     the Banks; or

          (f) the application of any sums by whomsoever paid or however realized
     to any amounts owing by Borrower to the Agent and/or the Banks under the
     Loan Documents in such manner as the Agent shall determine in its sole
     discretion; or

          (g) Borrower's or any guarantor's voluntary or involuntary
     liquidation, dissolution, sale of all or substantially all of their
     respective assets and liabilities, appointment of a trustee, receiver,
     liquidator, sequestrator or conservator for all or any part of Borrower's
     or Guarantor's assets, insolvency, bankruptcy, assignment for the benefit
     of creditors, reorganization, arrangement, composition or readjustment, or
     the commencement of other similar proceedings affecting Borrower or any
     guarantor or any of the assets of any of them, including, without
     limitation, (i) the release or discharge of Borrower or any guarantor from
     the payment and performance of their respective obligations under any of
     the Loan Documents by operation of law, or (ii) the impairment, limitation
     or modifica-

                                       4
<PAGE>

     tion of the liability of Borrower or any guarantor in bankruptcy, or of any
     remedy for the enforcement of the Guaranteed Obligations under any of the
     Loan Documents, or Guarantor's liability under this Guaranty, resulting
     from the operation of any present or future provisions of the Bankruptcy
     Code or other present or future federal, state or applicable statute or law
     or from the decision in any court; or

          (h) any improper disposition by Borrower of the proceeds of the
     Loans, it being acknowledged by Guarantor that the Agent or any Bank shall
     be entitled to honor any request made by Borrower for a disbursement of
     such proceeds and that neither the Agent nor any Bank shall have any
     obligation to see the proper disposition by Borrower of such proceeds.

          6.  Guarantor agrees that if at any time all or any part of any
payment at any time received by the Agent and/or any Bank from Borrower or
Guarantor under or with respect to this Guaranty is or must be rescinded or
returned by the Agent or any Bank for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower or
Guarantor), then Guarantor's obligations hereunder shall, to the extent of the
payment rescinded or returned, be deemed to have continued in existence
notwithstanding such previous receipt by such party, and Guarantor's obligations
hereunder shall continue to be effective or reinstated, as the case may be, as
to such payment, as though such previous payment had never been made.

          7.  Until this Guaranty is terminated pursuant to the terms hereof,
Guarantor (i) shall have no right of subrogation against Borrower or any entity
comprising same by reason of any payments or acts of performance by Guarantor in
compliance with the obligations of Guarantor hereunder, (ii) waives any right to
enforce any remedy which Guarantor now or hereafter shall have against Borrower
or any entity comprising same by reason of any one or more payment or acts of
performance in compliance with the obligations of Guarantor hereunder and (iii)
from and after an Event of Default (as defined in the Credit Agreement),
subordinates any liability or indebtedness of Borrower or any entity comprising
same now or hereafter held by Guarantor or any affiliate of Guarantor to the
obligations of Borrower under the Loan Documents.

          8.  Guarantor represents and warrants to the Agent and the Banks with
the knowledge that the Agent and the Banks are relying upon the same, as
follows:

                                       5
<PAGE>

          (a) as of the date hereof, Guarantor is the sole general partner of
     Borrower;

          (b) based upon such relationship, Guarantor has determined that it is
     in its best interests to enter into this Guaranty;

          (c) this Guaranty is necessary and convenient to the conduct,
     promotion and attainment of Guarantor's business, and is in furtherance of
     Guarantor's business purposes;

          (d) the benefits to be derived by Guarantor from Borrower's access to
     funds made possible by the Loan Documents are at least equal to the
     obligations undertaken pursuant to this Guaranty;

          (e) Guarantor is Solvent and has full power and legal right to enter
     into this Guaranty and to perform its obligations under the terms hereof
     and (i) Guarantor is organized and validly existing under the laws of the
     State of Maryland, (ii) Guarantor has complied with all provisions of
     applicable law in connection with all aspects of this Guaranty, and (iii)
     the person executing this Guaranty has all the requisite power and
     authority to execute and deliver this Guaranty;

          (f) to the best of Guarantor's knowledge, there is no action, suit,
     proceeding, or investigation pending or threatened against or affecting
     Guarantor at law, in equity, in admiralty or before any arbitrator or any
     Governmental Authority (domestic or foreign) which is likely to materially
     and adversely impair the ability of Guarantor to perform its obligations
     under this Guaranty;

          (g) the execution and delivery of and the performance by Guarantor of
     its obligations under this Guaranty have been duly authorized by all
     necessary action on the part of Guarantor and do not (i) violate any
     provision of any law, rule, regulation (including, without limitation,
     Regulation U or X of the Board of Governors of the Federal Reserve System
     of the United States), order, writ, judgment, decree, determination or
     award presently in effect having applicability to Guarantor or the
     organizational documents of Guarantor the consequences of which violation
     are likely to materially and adversely impair the ability of Guarantor to
     perform its obligations under this Guaranty or (ii) violate or conflict
     with,

                                       6
<PAGE>

     result in a breach of or constitute (with due notice or lapse of time or
     both) a default under any indenture, agreement or other instrument to which
     Guarantor is a party, or by which Guarantor or any of its property is bound
     the consequences of which violation, conflict, breach or default are likely
     to materially and adversely impair the ability of Guarantor to perform its
     obligations under this Guaranty;

          (h) this Guaranty has been duly executed by Guarantor and constitutes
     the legal, valid and binding obligation of Guarantor, enforceable against
     it in accordance with its terms, except as such enforceability may be
     limited by applicable insolvency, bankruptcy or other laws affecting
     creditors' rights generally or general principles of equity, whether such
     enforceability is considered in a proceeding in equity or at law;

          (i) no authorization, consent, approval, license or formal exemption
     from, nor any filing, declaration or registration with, any Governmental
     Authority is required in connection with the making and performance by
     Guarantor of this Guaranty, except those which have already been obtained
     and are in full force and effect; and

          (j) Guarantor is not an "investment company" as that term is defined
     in, nor is it otherwise subject to regulation under, the Investment Company
     Act of 1940, as amended.

          9.  Guarantor and the Agent each acknowledge and agree that this
Guaranty is a guarantee of payment and performance and not of collection and
enforcement in respect of any obligations which may accrue to the Agent and/or
the Banks from Borrower under the provisions of any Loan Document.

          10. Subject to the terms and conditions of the Credit Agreement, and
in conjunction therewith, the Agent or any Bank may assign any or all of its
rights under this Guaranty.  In the event of any such assignment, the Agent
shall give Guarantor prompt notice of same.  If the Agent and/or any Bank elects
to sell all the Loans or participations in the Loans and the Loan Documents,
including this Guaranty, the Agent or any Bank may forward to each purchaser and
participant and prospective purchaser and participant all documents and
information relating to this Guaranty or to Guarantor, whether furnished by
Borrower or Guarantor or otherwise, subject to the terms and conditions of the
Credit Agreement.

                                       7
<PAGE>

          11.  Guarantor agrees, upon the written request of the Agent, to
execute and deliver to the Agent, from time to time, any modification or
amendment hereto or any additional instruments or documents reasonably
considered necessary by the Agent or its counsel to cause this Guaranty to be,
become or remain valid and effective in accordance with its terms, provided,
that, any such modification, amendment, additional instrument or document shall
not increase Guarantor's obligation's or diminish its rights hereunder and shall
be reasonably satisfactory as to form to Guarantor and to Guarantor's counsel.

          12.  The representations and warranties of Guarantor set forth in this
Guaranty shall survive until this Guaranty shall terminate in accordance with
the terms hereof.

          13.  This Guaranty contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
relating to such subject matter and may not be modified, amended, supplemented
or discharged except by a written agreement signed by Guarantor and the Agent.

          14.  If all or any portion of any provision contained in this Guaranty
shall be determined to be invalid, illegal or unenforceable in any respect for
any reason, such provision or portion thereof shall be deemed stricken and
severed from this Guaranty and the remaining provisions and portions thereof
shall continue in full force and effect.

          15.  This Guaranty may be executed in counterparts which together
shall constitute the same instrument.

          16.  All notices, requests and other communications to any party
hereunder shall be in writing (including bank wire, telex, facsimile
transmission followed by telephonic confirmation or similar writing) and shall
be addressed to such party at the address set forth below or to such other
address as may be identified by any party in a written notice to the others:

                                       8
<PAGE>

If to Guarantor:  Cabot Industrial Trust
                  Two Center Plaza
                  Boston, Massachusetts 02108-1906
                  Facsimile No.: (617) 722-8237
                  Attn: Chief Financial Officer
With Copies of
Notices to
Guarantor to:     Mayer, Brown & Platt
                  190 South LaSalle Street 60603-3441
                  Chicago, Illinois 60603-3441
                  Facsimile No.: (312) 701-7711
                  Attn: J. Thomas Mullen, Esq.

If to the Agent:  Morgan Guaranty Trust Company of New York
                  60 Wall Street
                  New York, New York 10260-0060
                  Attention:  George E. Winckler
                  Facsimile number: (212) 648-5018
Copies of
Notices to the
Agent to:         Skadden, Arps, Slate, Meagher & Flom LLP
                  Four Times Square
                  New York, New York 10036
                  Facsimile No.: (212) 735-2000
                  Attn:  Martha Feltenstein, Esq.

          Each such notice, request or other communication shall be effective
(i) if given by telex or facsimile transmission, when such telex or facsimile is
transmitted to the telex number or facsimile number specified in this Section
and the appropriate answerback or facsimile confirmation is received, (ii) if
given by certified registered mail, return receipt requested, with first class
postage prepaid, addressed as aforesaid, upon receipt or refusal to accept
delivery, (iii) if given by a nationally recognized overnight carrier, 24 hours
after such communication is deposited with such carrier with postage prepaid for
next day delivery, or (iv) if given by any other means, when delivered at the
address specified in this Section.

          17.  Any acknowledgment or new promise, whether by payment of
principal or interest or otherwise by Borrower or Guarantor, with respect to the
Guaranteed Obligations shall, if the statute of limitations in favor of
Guarantor

                                       9
<PAGE>

against the Agent shall have commenced to run, toll the running of such statute
of limitations, and if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.

          18.  This Guaranty shall be binding upon Guarantor and its successors
and assigns and shall inure to the benefit of the Agent and the Banks and their
successors and permitted assigns.

          19.  The failure of the Agent to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against the Agent, nor excuse
Guarantor from its obligations hereunder. Any waiver of any such right or remedy
to be enforceable against the Agent must be expressly set forth in a writing
signed by the Agent.

          20.  (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW).

               (b) Any legal action or proceeding with respect to this Guaranty
and any action for enforcement of any judgment in respect thereof may be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York and, by execution and delivery of this
Guaranty, the Guarantor hereby accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts and appellate courts from any thereof. The Guarantor
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Guarantor at its address
for notices set forth herein. The Guarantor hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Guaranty brought in the courts referred to above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any such action
or proceeding brought in any such court has been brought in an inconvenient
forum. Nothing herein shall affect the right of the Agent to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Guarantor in any other jurisdiction.

                                       10
<PAGE>

          (c)  GUARANTOR HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY AND ALL
CLAIMS OR CAUSES OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. IT IS
HEREBY ACKNOWLEDGED BY GUARANTOR THAT THE WAIVER OF A JURY TRIAL IS A MATERIAL
INDUCEMENT FOR THE AGENT TO ACCEPT THIS GUARANTY AND THAT THE LOANS MADE BY THE
BANKS ARE MADE IN RELIANCE UPON SUCH WAIVER. GUARANTOR FURTHER WARRANTS AND
REPRESENTS THAT SUCH WAIVER HAS BEEN KNOWINGLY AND VOLUNTARILY MADE, FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS GUARANTY MAY
BE FILED BY THE AGENT IN COURT AS A WRITTEN CONSENT TO A NON-JURY TRIAL.

          (d)  Guarantor does hereby further covenant and agree to and with the
Agent that Guarantor may be joined in any action against Borrower in connection
with the Loan Documents and that recovery may be had against Guarantor in such
action or in any independent action against Guarantor (with respect to the
Guaranteed Obligations), without the Agent first pursuing or exhausting any
remedy or claim against Borrower or its successors or assigns. Guarantor also
agrees that, in an action brought with respect to the Guaranteed Obligations in
any jurisdiction, it shall be conclusively bound by the judgment in any such
action by the Agent (wherever brought) against Borrower or its successors or
assigns, as if Guarantor were a party to such action, even though Guarantor was
not joined as parties in such action.

          (e)  Guarantor agrees to pay all reasonable expenses (including,
without limitation, attorneys' fees and disbursements) which may be incurred by
the Agent or the Banks in connection with the enforcement of their rights under
this Guaranty, whether or not suit is initiated.

     21.  Notwithstanding anything to the contrary contained herein, this
Guaranty shall terminate and be of no further force or effect upon the full
performance and payment of the Guaranteed Obligations hereunder. Upon
termination of this Guaranty in accordance with the terms of this Guaranty, the
Agent promptly shall deliver to Guarantor such documents as Guarantor or
Guarantor's counsel reasonably may request in order to evidence such
termination.

     22.  All of the Agent's rights and remedies under each of the Loan
Documents or under this Guaranty are intended to be distinct, separate and
cumu-

                                       11
<PAGE>

lative and no such right or remedy therein or herein mentioned is intended to be
in exclusion of or a waiver of any other right or remedy available to the Agent.

                                       12
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Guaranty as of the date and year first above written.


                                       GUARANTOR:

                                       CABOT INDUSTRIAL TRUST


                                       By: /s/ Neil E. Waisnor
                                           ------------------------
                                           Name:  Neil E. Waisnor
                                           Title: Senior Vice President, Finance




ACCEPTED:

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent


By: /s/ Robert Bottamedi
    ---------------------------
    Name:  ROBERT BOTTAMEDI
    Title: VICE PRESIDENT
<PAGE>

                         ACKNOWLEDGMENT FOR GUARANTOR
                         ----------------------------



COMMONWEALTH OF MASSACHUSETTS       )
                                    ) ss.
COUNTY OF Suffolk                   )
          -------

          On October 18, 2000, before me personally came Neil Waisnor, to me
                                                         ------------
known to be the person who executed the foregoing instrument, and who, being
duly sworn by me, did depose and say that he is Sr.VP of Cabot Industrial Trust,
                                                -----
and that he executed the foregoing instrument in the organization's name, and
that he had authority to sign the same, and he acknowledged to me that he
executed the same as the act and deed of said organization for the uses and
purposes therein mentioned.



[Seal]                        Kathleen M. Reardon
                              -------------------
                                 Notary Public


                              KATHLEEN M. Reardon, Notary Public
                              My Commission Expires April 23, 2004