The Los Angeles office market ended the first quarter with the average asking rent steady over the prior quarter. However, at $3.20 per square foot, the average asking rent remains the highest level on record, up 4.2 percent over the first quarter of 2018 and 15 percent above the prior peak reached in 2008. While the vacancy rate this quarter increased 30 basis points over the prior quarter, it is down 10 basis points from Q1 2018 at 10.6 percent. This is about where it was pre-recession in 2004. This rise in vacancy was the result of several large move-outs, including about 200,000 square feet in the South Bay and 50,000 square feet in the Central office markets. Leasing volume fell to 5.8 million square feet, down 19.6 percent from the prior quarter and 7.9 percent from Q1 2018. The rate of job growth is having some impact on the office market. Los Angeles County remains near full employment with the unemployment rate at 4.6 percent, one of the lowest rates on record. The Los Angeles County Economic Development Corporation (LAEDC) notes the county added 59,000 jobs in 2018. The latest LAEDC jobs forecast points to a strong and steady …
Given the pace at which the Detroit commercial office space market is evolving, updates and projections are changing with extraordinary speed. The market can look very different in just a few short months, and it’s worth checking in to see where things stand relative to the beginning of the year. CBD occupancy is high While growth remains the headline story, the focus has changed somewhat from a high level of leasing activity across the metro area to more of adaptation and evolution as landlords, tenants and brokers all adapt to a downtown market that is reaching capacity. The vacancy rate in Detroit proper is the lowest it has ever been, and office space in Midtown and downtown is getting harder and harder to come by. Deals are still being executed across metro Detroit, but with rents continuing to rise and space at a premium, the incentives landscape looks nothing like it has in recent years. Parking rates have increased dramatically with a major shortage in parking in the central business district (CBD). The monthly cost of parking has increased to approximately $250 per space downtown. Creative solutions Incentives continue and have produced new opportunity for creativity, as owners and operators …
Today, San Antonio’s downtown office market gets the most media exposure because new office development was nonexistent since the late 1980s and is recently picking up speed with the Pearl office buildings and Frost Tower. San Antonio’s low cost of doing business and strong population growth should lead to continued expansion in the office market citywide. What isn’t getting the attention is the fact that new development in the suburbs is still holding strong. Many companies expanding or moving here find suburban properties to be attractive options, as these buildings frequently offer larger, more efficient floor plates, which can help investors extend their dollars. Parking availability alone gives the suburbs a major advantage over downtown properties, where parking ratios are considerably lower and premium parking and higher ratios are charged to tenants or their employees. Why the Suburbs? Office investors and users alike are finding the suburbs to be comparable to those in the central business district, but at much lower occupancy costs per employee. Case in point: CBD asking rents for new office space range from $32 to $42 per square foot on a triple-net basis with minimal parking while those in the suburbs range from $24 to $30 …
In the last few years, the greater Des Moines metro area has been a title holder, reigning as a “Top Place to Live,” “Top City for Young Professionals” and even “Best Place to Retire.” Meanwhile the economy, business environment and commercial real estate sector hold titles like steady, stable and reliable. However, over the past 24 months, the commercial office market could add thriving, prosperous and robust to that list of adjectives. As office lease rates continue to rise 1.5 to 2.5 percent annually in quality buildings, most landlords are implementing capital improvement plans that “refresh” their assets and have begun to offer amenity packages that the tenant marketplace demands. With the unemployment rate near a historical low — an estimated 2.4 percent — it has become ever more critical and competitive to recruit and retain new workforce talent. Lease concession offerings from landlords, such as rent abatement and above-standard tenant improvement packages, have decreased since post-recession levels. Despite these positive fundamentals, headwinds are facing the marketplace. A tremendous amount of block space, some from formerly non-competitive or single-tenant buildings, has come available and concession levels could once again increase as landlords compete for tenants looking for a larger footprint. …
More than 50 years ago, I was witness to the birth of a new building type in Chicago’s suburbs — the great sprawling corporate campus. From Motorola and McDonald’s to Ameritech and Sears, some of the most influential brands in the world started taking root in Chicago’s bucolic suburbs as they looked to consolidate business divisions under one large roof and to provide a stimulating work environment away from the hustle and bustle of the inner city. Today, many of these corporate meccas sit vacant due to the rise in telecommuting and a shift in workforce demographics. The simple version of the narrative is that instead of people chasing the jobs, firms are now chasing the talent. And for the moment, many employees prefer to live and work in the city. While some suburbs are strongly associated with the companies who previously occupied those campuses, there is another story to tell in terms of the opportunities change can bring to these properties and their surrounding communities. As the architect who designed two of these campuses, the AT&T (né Ameritech) corporate campus in Hoffman Estates in 1989 and McDonald’s global headquarters in Oak Brook starting in 1978, I have repeatedly been …
Development of new office space in the McAllen-Edinburg-Mission metro area rarely happens on a large scale. This ensures that the market remains steady, if unspectacular, assuming the fundamentals during both expansions and contractions do not change. According to CoStar Group, the metro’s office vacancy rate currently stands at 6 percent, while the average asking rent sits at $20.44 per square foot. Modest vacancy compression and rent growth are forecast for the coming years, with the vacancy and average asking rents expected to hit 4.2 percent and $21.30 per square foot, respectively, by 2023. Throughout the Rio Grande Valley (RGV) region as a whole, office market growth is largely confined to McAllen and Edinburg. There is one signature project — Rio Bank’s new corporate headquarters in McAllen — that will serve as a barometer of how well the market can large additions of quality space. According to local newspaper The Valley Morning Star, the 125,469-square-foot project carries a price tag of $20 million. Construction began in January 2018 and is slated to open either late this year or early in 2020, with the namesake tenant expected to occupy about a third of the space. Per local sources, the property, which is …
Despite the heartache from losing the bid for Amazon’s second headquarters, New Jersey is undoubtedly in a more competitive position than it was before the selection process began. The exercise of responding to Amazon’s request for proposals showcased many of New Jersey’s strengths, such as its talented labor pool, access to higher education and vast transportation infrastructure. As we now know, these assets weren’t enough to secure the Amazon campus, leaving state officials and business leaders motivated to work on those areas identified as falling short. But that doesn’t take away from what the state offers both corporate occupiers and institutional investors. To start, building owners are increasingly investing significant capital to improve and expand New Jersey’s aging supply of office properties. This is music to a tenant’s ears and, as a result, the office market continued its streak of growing occupancy with 302,577 square feet of positive absorption in the fourth quarter, according to Transwestern. Where many of the new leases were signed, landlords committed to substantial capital improvement programs. For the past several years, the best lease-up success stories have come from owners that upgraded their properties to current standards and added amenities preferred by today’s dynamic workforce. …
New York City recently passed the Climate Mobilization Act, the first real action by any city to require buildings’ greenhouse gas emissions to meet global climate targets. The new law requires owners of large buildings to meet carbon footprint standards or face millions of dollars in annual fines. The emission limits will begin in 2024 and become increasingly stringent from there. The legislation primarily applies to commercial office and market-rate multifamily buildings over 25,000 square feet. According to Urban Green, these buildings account for about 60 percent of the total building area in New York City — those that make up the Manhattan skyline. While skyscrapers will be forced to act first, significant levels of investment will also be needed for public buildings, affordable housing and non-profits. The Real Estate Board of New York (REBNY) estimates the total cost of the upgrades needed to comply with the new law is about $4 billion. Building owners can calculate the performance targets they’ll need to meet and the associated fines if they fail to meet them. While it may be possible to buy renewable energy credits to offset emissions, it is unclear how many will be available. Some buildings will need to …
Despite the rise of the gig economy, the explosion of coworking concepts and the move toward greater density among office-using companies, America’s office market is maintaining steady growth and balance, thanks to the exceptional job growth of this cycle. According to Costar Group, the national office vacancy rate currently stands at a 9.8 percent. Developers delivered approximately 59.3 million square feet of new product over the last 12 months. National net absorption of 56.6 million square feet during that period suggests that the market is quite close to equilibrium. According to the most current available data from the Bureau of Labor Statistics (BLS) at the time of this writing, between December 2018 and January 2019, American nonfarm payrolls added about 525,000 new jobs. The BLS reported substantially lower job growth in February, with just 20,000 new positions added. However, most economists expect that figure to be revised upward as the effects of Mother Nature and the government shutdown wear off. While office properties only capture a portion of that activity, job growth expectations are still the main criteria by which office market health is evaluated. By that logic, the office markets of Texas’ four largest cities should all post strong …
It’s not often that a single project captures an office market’s growth and evolution over a 40-year period. But that is precisely what’s happening in El Paso. WestStar Tower, a 19-story, Class A building, is the first project of its kind to be built in El Paso in 40 years since the 415,000-square-foot Stanton Tower was constructed for El Paso Natural Gas. With co-developers Hunt Cos. and WestStar Bank beginning vertical construction of the 262,000-square-foot building last summer, El Paso’s skyline is set to change considerably upon its completion in late 2020. The symbolism of WestStar Tower to El Paso is not unlike the relationship between Frost Tower and San Antonio, another city that was starved of major Class A office development throughout the 1990s and 2000s. With both cities experiencing steady job growth from local expansions and new relocations, developers of quality office product are viewing these markets in new lights. El Paso is also getting younger. According to recent research from El Paso’s economic development department, roughly 40 percent of the city’s 838,000 residents are under the age of 40. The median age is 31 and the city ranks in the Top 10 in terms of its appeal …