CHICAGO —The most expensive street for office space in the U.S. is in a San Francisco suburb, according to a Jones Lang LaSalle (JLL) research study. JLL researched 40 markets across the country and pared down the top 10 streets in terms of their average rental rates for office space.
Sand Hill Road in Menlo Park, Calif., part of the San Francisco Peninsula market, is No. 1 on the list with average rents reaching almost $111 per square foot. New York City’s Fifth Avenue holds the No. 2 spot at $102 per square foot. Northern California’s University Avenue in Silicon Valley comes in at No. 3 spot with average rents of about $95 per square foot.
Nationally, rental rates on the most expensive streets increased 10.9 percent on average since 2011 due to the recovery from the downturn and the lack of new construction leading to supply constraints.
Reflecting the tech industry’s growth, the San Francisco Bay area holds three spots in the top 10 rankings — more than any other office market. California Street in the city of San Francisco moves up several notches to No. 6 with a 45.3 percent increase to $62 per square foot, placing it above Boston’s Boylston Street for the first time.
For Houston and Dallas, the energy sector is driving up rents on Louisiana Street and McKinney Avenue, which have experienced rent growth of 11.8 and 5.4 percent, respectively.
JLL also reported that occupancy is rising quickly on high-profile streets in many markets hit worst by the recession. These include Brickell Avenue in Miami, Peachtree Street in Atlanta, Fayetteville Street in Raleigh and Boy Scout Boulevard in Tampa. Also illustrating an improving economy, single-digit vacancies were achieved by 14 streets in the rankings. Midwestern markets remain the most affordable, of which the most expensive street is Chicago’s Wacker Drive, where a tenant can expect to pay $36 per square foot.
“This year’s results are particularly interesting because, not only do they demonstrate the standard real estate rule that location is everything, but they also reflect the overall office space demand trend in the U.S.,” says John Sikaitis, managing director of office research at JLL. “We are seeing a slight uptick in occupancy rates as a result of the rate of business growth in the economy combined with a lack of new development.”
Graphic courtesy of Jones Lang LaSalle
The top 10 most expensive U.S. streets for office space are as follows:
1. Sand Hill Road in Menlo Park, Calif. at $111 per square foot
Historically the most expensive area in Silicon Valley, Sand Hill Road has deep roots with the venture capital community and houses the top venture capital firms in the greater Bay Area.
2. Fifth Avenue in Midtown Manhattan, New York City at $102 per square foot
Consistently ranked among the most expensive shopping streets in the world, Fifth Avenue is also home to numerous hedge funds looking for top-quality space in Midtown and willing to pay more for those coveted office locations with their unparalleled amenities.
3. University Avenue in Silicon Valley, Calif. at $95 per square foot
Located in Downtown Palo Alto, University Avenue is known for its vibrant startup community, as its proximity to Stanford University makes it an ideal location for recruiting top young talent.
4. Greenwich Avenue in Greenwich, Conn. at $93 per square foot
Top-shelf retail establishments dot the historically rich Greenwich Avenue, from the top of the avenue down through the transit center. Hedge funds and financial services firms occupy the majority of office space, with many top executives only steps from their homes. Premier office buildings offer close proximity to the train and command rents as high as $100 per square foot.
5. Pennsylvania Avenue in Washington, D.C. at $76 per square foot
Despite slower overall market conditions in recent quarters, Pennsylvania Avenue has continued to experience rent premiums to the rest of the market. Known as “America’s Main Street,” Pennsylvania Avenue is home to many firms wanting close proximity to Washington’s two main points of power: the White House to the west and the Capitol to the east. A big growth area in tenant demand in recent years has stemmed from the government affairs sector of corporate America.
6. California Street in San Francisco at $62.10 per square foot
The main street of the city’s North Financial District, California Street, is known for its historic cable car route, broadness and high-priced real estate. Growth in tech and associated industries, along with limited new supply, have pushed rents up by almost 50 percent during the past two years.
7. Boylston Street in Boston at $60.20 per square foot
Boylston Street runs through two of Boston’s most prestigious areas: Back Bay and the Financial District. The street is home to numerous landmarks, trophy office buildings and high-end retail, as well as some of the city’s most distinctive skyscrapers.
8. Avenue of the Stars in Los Angeles at $60.12 per square foot
The thoroughfare through the highly desirable Century City market, Avenue of the Stars is home to many prominent legal and financial service firms and talent firms, as well as the largest cluster of Class A trophy assets on the Westside.
9. Royal Palm Way in West Palm Beach, Fla. at $58.52 per square foot
Royal Palm Way is dubbed “Banker’s Row” due to the concentration of wealth management and financial services firms, catering to the wealthy residents on Palm Beach Island.
10. Newport Center Drive in Orange County, Calif. at $50.06 per square foot
Sitting on a bluff overlooking the Pacific Ocean, Newport Center Drive is a 1.3-mile ring that encompasses the Fashion Island retail center. World class dining and retail amenities along with ocean view suites and access to posh residential neighborhoods make Newport Center Drive one of the most premiere places to rent office space in Southern California.
— staff reports