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September 15, 2017

Nothing compares to the prestige of being in a premium office building – even if it comes with a sky-high cost. And this year, the price tag for space in one of North America’s Skyline buildings works out to an average of $44.55 per square foot – an all-time high.

Despite seeing rents in record territory, Skyline vacancy (12.9 percent) remains well below average (14.5 percent). And even less Trophy space – the ultra-premium real estate within a city’s Skyline – is available (10 percent), giving landlords the upper hand.

We’re crisscrossing North America to check out the most expensive Skyline markets based on current direct asking rent. Sure, the usual suspects like New York, Washington, DC and San Francisco still command the highest rents, but you may be surprised by a few others that have become increasingly attractive places to be.

Visit JLL’s Skyline for floor-by-floor data on 1,300+ office buildings across the United States and Canada.

 

10

Bellevue | $46.77 p.s.f.*

Even with an influx of new space on the market, Skyline real estate was filled in large numbers. The city can thank the vitality of its live-work-play environment and its proximity to leading businesses. Those factors contributed to new Skyline construction coming on the market almost 75 percent leased with multiple potential deals still in the works. Was it really just a year ago that the city was facing the prospect of rising vacancies?

 

9

Miami | $46.80 p.s.f.*

Rents may be rising but demand is holding strong. Availability of the sought-after higher elevation spaces – where the biggest views are accompanied by the biggest rents – may be tougher to come by, but there’s enough inventory to satisfy normal demand in the near term.

 

8

Oakland | $54.00 p.s.f.*

New office development is at least 6-18 months away, but tenants and investors are looking for space now. That means rents for trophy buildings are reaching record highs. Availability will remain tight for trophy assets and rehabbed Class B buildings – all of which have seen strong demand from a range of tenants.

 

7

Stamford | $54.55 p.s.f.*

Prices are high for now, but the scale might tipping. Four Skyline buildings in the city can accommodate tenants looking for space larger than 50,000 square feet. With space like that available, high vacancy is expected to continue into the near future. In fact, the city could see vacancy levels at 30 percent or higher as it looks for ways to attract larger firms who have gravitated to bigger cities in search of millennial talent. In the meantime, it’s a tenant’s market.

 

6

Austin | $58.81. p.s.f.*

Companies keep expanding and relocating, and the rents keep soaring as inventory stays in short supply. Case-in-point: Merck’s recent announcement of a 600-person IT innovation center. Developers are cautiously pursuing new construction without secured lessees….perhaps too cautiously, given the strong uptake of new real estate.

 

5

Century City | $57.84 p.s.f.*

Available space is disappearing about as quickly as the lower-priced options. The market has shaken off the moderate pressure of a few years ago and is now basking in a wave of expansion and migration from surrounding areas.

 

4

Boston | $62.13 p.s.f.*

No new Skyline construction is on the horizon. That lack of supply likely paves the way for landlords to continue moderately raising asking rents. Access to talent is the most important location decision, so strong demand remains for the vibrant Seaport and transportation-rich Downtown submarkets.

 

3

San Francisco | $76.11 p.s.f.*

Skyline rents will continue to grow as positive market demand remains in place, but expect the rate of increase to slow or flatten altogether along with the tech industry’s annual growth levels. New construction will bring new high-priced blocks to the market, which will eventually soften conditions and shift leverage from landlords back to neutral territory in 2018.

 

2

Washington, DC | $83.09 p.s.f.*

For now, the amount of vacant space will be low as a result of increased lobbying efforts among Fortune 500 companies and expansion within the tech sector. By late 2019, new Trophy buildings will start arriving. By 2020, it could be a completely different story as the market likely softens. Law firms, for example, are adjusting their space needs and becoming more efficient, which could lead to oversupply.

 

1

New York City | $87.90 p.s.f.*

New towers are rising on Manhattan’s west side and at the World Trade Center. Not to be outdone, landlords are investing billions of dollars to turn well-located buildings into trophy assets. When it’s all said and done, the post-election bump in leasing activity could be thrown off by new buildings and an excess of space.

 

*Direct average asking rent for Skyline properties. Data is from June 2017.

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Scott Homa

Director, U.S. Office Research

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