Just how much will companies pay to occupy one of America’s most desired office addresses? According to JLL’s 2017 Most Expensive Streets study, which looks at the priciest U.S. office space, those high-profile strips command an average asking rent of $48.65 per square foot, a 46.9-percent premium compared to the rest of the country.
And they remain as popular as ever. Just 12.8 percent of the nation’s most expensive real estate is vacant – a full 250 basis points lower than the U.S. average.
What’s driving these expensive prices for the top streets? The age-old real estate adage of “location, location, location” still holds true, but it’s the new mix of tenants that’s increasing competition.
“As tech companies mature, their space needs begin to mirror those of traditional white-collar industries in these expensive locations,” said Scott Homa, JLL Director of U.S. Office Research. “Sand Hill Road is no longer the only example of this. We see it in cities like Boston, Cambridge and Austin where major tech players have leased large blocks of premium space.”
A new surge in development has also boosted prices in these areas. For instance, the delivery of FMC Tower on 30th Street in Philadelphia has cemented University City as one of the most desirable office locations in the region’s core. That street is now the most expensive in Philadelphia, a city in the midst of a tech, media, education and health expansion. Vacancy on 30th Street is just 7.1 percent and rents carry an 83.9 percent premium, a number that is sure to increase as the Schuykill Yards development matures.
“In the battle for talent, companies are always looking for something new to give them an edge,” said Chris Roeder, JLL Managing Director of Agency Leasing. “Developers recognize that these high-end amenities – roof decks, open and collaborative space, etc. – will draw the big name tenants that help developments stand out.”