Post on 09-May-2015
description
Momentum building across and
through markets
United States Office Review Q1 2014
Market momentum defined the first quarter as fundamentals across geographies tightened, driving occupancy, rents and construction upward.
Pace of the recovery beings to accelerate as most fundamentals
demonstrate tightening
2
Source: JLL Research
Leasing activity • Q1 posted 58.3 million square feet of leasing activity.
• Leasing levels down 4.9 percent from Q4 2013.
• Compared to Q1 2013, leasing volume is down 4.1 percent.
Absorption
• Absorption levels increase, resulting in the 16th consecutive quarter of occupancy growth.
• Absorption gains totaled 8.4 million square feet in the quarter and overall in 2013, the highest first-quarter
activity seen in the recovery so far.
• This quarter’s biggest contributors to absorption were Houston, Atlanta, Silicon Valley, Baltimore, Los Angeles
and Phoenix.
Vacancy • Vacancy stayed stable at 16.6 percent as new space begins to slowly come to the market despite increased
occupancy gains.
• Similarly, CBD total vacancy remained at 13.9 percent and suburban total vacancy stayed firm at 18.2 percent.
Rents
• Tenants have far less leverage across urbanized, core markets, especially in Trophy and Class A buildings.
• Rents have now increased in 13 of the past 14 quarters.
• Class A rent growth continues to trump Class B rent movement across the board.
• Rents growing 1.6 times faster in CBDs than suburbs as the latter see a boost in momentum
• Concessions continue to erode and are now at 2008 levels nationally, but rate of decline slowing.
Construction • Construction starts no longer dominated by specific geographies.
• Most markets will not see new deliveries enter the market until 2015, presenting challenges for large tenants,
especially in CBDs.
36.0 percent of markets report declines in leasing activity;
sentiment is evenly split
3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014
Up Neutral Down
Source: JLL Research
Leasing activity totaled 58.3 million square feet, down 4.9
percent from Q4 2013
4
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
2007 2008 2009 2010 2011 2012 2013 2014
Leas
ing
activ
ity (
s.f.)
Source: JLL Research
Although the second consecutive quarter of leasing decline, Q1
2014 fares better than majority of recent first quarters
5
58,252,653
65,224,522
50,241,243
61,609,985
71,966,387
58,110,671
60,769,296
58,292,828
0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 80,000,000
Q1 2007
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Leasing activity (s.f.)
Source: JLL Research
Outside of top markets, leasing activity relatively even across
geographies
6
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000N
ew Y
ork
Was
hing
ton,
DC
Chi
cago
Bos
ton
Phi
lade
lphi
a
San
Fra
ncis
co
Los
Ang
eles
New
Jer
sey
Den
ver
Dal
las
Ora
nge
Cou
nty
Min
neap
olis
Bal
timor
e
Atla
nta
Tam
pa
Sea
ttle
Hou
ston
Por
tland
San
Die
go
Aus
tin
Ral
eigh
-Dur
ham
Cha
rlotte
Det
roit
Sili
con
Val
ley
Fai
rfie
ld C
ount
y
Pho
enix
Oak
land
-Eas
t Bay
Pitt
sbur
gh
Jack
sonv
ille
St.
Loui
s
Sac
ram
ento
Ham
pton
Roa
ds
San
Fra
ncis
co P
enin
sula
Cin
cinn
ati
Sal
t Lak
e C
ity
Mia
mi
Cle
vela
nd
Col
umbu
s
Milw
auke
e
For
t Lau
derd
ale
Ric
hmon
d
Wes
t Pal
m B
each
Wes
tche
ster
Cou
nty
Orla
ndo
San
Ant
onio
Long
Isla
nd
Indi
anap
olis
Leas
ing
activ
ity (
s.f.)
Source: JLL Research
40.0% 19.0% 41.0%
Q1 marks 16th consecutive quarter of positive net absorption and
keeps pace with historical averages
7
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2008 2009 2010 2011 2012 2013 2014
Qua
rter
ly n
et a
bsor
ptio
n (a
s %
of i
nven
tory
)
Source: JLL Research
15-year trailing annual average
YTD absorption represents roughly 20.9 percent of last year’s
occupancy gains
8
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
YT
D n
et a
bsor
ptio
n (a
s %
of i
nven
tory
)
Source: JLL Research
15-year trailing annual average
Suburban Class A space comprises the majority of absorption,
with Class B presence growing
9
-6,000,000
-4,000,000
-2,000,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
2010 2011 2012 2013 2014
Qua
rter
ly n
et a
bsor
ptio
n (s
.f.)
Class A (CBD) Class A (suburban)
Class B (CBD) Class B (suburban)
Class C (CBD) Class C (suburban)
Source: JLL Research
Sunbelt posts 430-basis-point absorption growth, while all of
New York’s gains were found in tech-heavy Midtown South
10
Source: JLL Research
NYC and DC (*excludes Midtown South)
Tech markets (*includes Midtown South)
Energy markets
Sunbelt
All other markets
70.0%
29.7%
6.4%
2010
5.1%
33.5%
19.0%
18.4%
23.9%
2011
5.1%
33.5%
19.0%
18.4%
23.9%
2012
11.1%
21.6%
22.3%
18.6%
26.4%
2013
0.0%
34.2%
23.2%
22.9%
19.7%
2014
…but a far greater number of markets are now contributing to
occupancy growth
11
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000H
oust
on
Atla
nta
Sili
con
Val
ley
Bal
timor
e
Los
Ang
eles
Pho
enix
Den
ver
Dal
las
Fai
rfie
ld C
ount
y
Ral
eigh
-Dur
ham
Por
tland
St.
Loui
s
Det
roit
Bos
ton
Sea
ttle-
Bel
levu
e
Cha
rlotte
New
Yor
k
Col
umbu
s
Tam
pa B
ay
Chi
cago
Wes
t Pal
m B
each
San
Fra
ncis
co
Oak
land
-Eas
t Bay
San
Fra
ncis
co P
enin
sula
Long
Isla
nd
Cin
cinn
ati
Sal
t Lak
e C
ity
Mia
mi
For
t Lau
derd
ale
Jack
sonv
ille
Ham
pton
Roa
ds
Milw
auke
e
San
Die
go
Sac
ram
ento
Min
neap
olis
Cle
vela
nd
Aus
tin
Orla
ndo
Indi
anap
olis
New
Jer
sey
Pitt
sbur
gh
Phi
lade
lphi
a
Wes
tche
ster
Cou
nty
San
Ant
onio
Ric
hmon
d
Ora
nge
Cou
nty
Was
hing
ton,
DC
YT
D n
et a
bsor
ptio
n (s
.f.)
Source: JLL Research
Energy, tech and Sunbelt markets all posting above-average
absorption; energy and tech remain ahead
12
0.2%
0.4%
0.8%
0.6%
0.2%
0.3%
0.5%
1.4%
0.8%
0.2%
0.8% 0.8%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
YT
D n
et a
bsor
ptio
n (s
.f.)
Source: JLL Research
Energy Tech Sunbelt
U.S. average
West Coast leads occupancy gains, but all regions nearly level in
terms of absorption, speaking to diversified nature of the
recovery
13
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014
Sha
re o
f qua
rter
ly n
et a
bsor
ptio
n
East Coast Central West Coast
Source: JLL Research
Atlanta and South Florida remain disproportionate contributors,
responsible for 53.8 percent of East Coast absorption in Q1
14
Source: JLL Research
-10,000,000
-5,000,000
0
5,000,000
10,000,000
15,000,000
20,000,000
2010 2011 2012 2013 2014
Net
abs
orpt
ion
(s.f.
)
Atlanta South Florida Rest of the East Coast
-3,000,000
-2,000,000
-1,000,000
0
1,000,000
2,000,000
3,000,000
2010 2011 2012 2013 2014
Net
abs
orpt
ion
(s.f.
)
Atlanta Chicago Los Angeles Miami Philadelphia Phoenix
As diversified markets recover, Atlanta and Phoenix lead the
pack
15
Source: JLL Research
Atlanta and Phoenix have
absorbed a combined 12.2
million square feet since
2010, or 72.6 percent of
cumulative total.
Class B absorption over the past four quarters has exceeded all
Class B occupancy gains from 2010 to Q1 2013
16
Source: JLL Research
8,676,599
10,564,556
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2010-Q1 2013 Past four quarters
Cla
ss B
net
abs
orpt
ion
(s.f.
)
667,430 s.f. per quarter 2,641,139 s.f. per quarter
…but Class A has remains the leader in absorption since 2011
17
Source: JLL Research
Trophy and Class A
net absorption
89.0 m.s.f.
2011-2014
Class B and C net
absorption
22.6 m.s.f.
2011-2014
However, it has resulted in Class A’s share of quarterly absorption
falling to its second-lowest level during the recovery so far
18
133.5%
93.9%
74.5% 76.3%
295.2%
98.5%
82.0% 78.3%
45.2%
73.4% 63.5%
80.9%
57.3%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
350.0%
2011 2012 2013 2014
Cla
ss A
sha
re o
f qua
rter
ly a
bsor
ptio
n
Source: JLL Research
The same holds true for CBDs, with Class A absorbing slightly
less than half of all core space…
19
166.2%
90.4% 88.8% 80.8%
100.0% 106.1%
74.8%
0.0%
88.1% 86.5%
49.6%
92.0%
48.8%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
2011 2012 2013 2014
Cla
ss A
sha
re o
f qua
rter
ly a
bsor
ptio
n
Source: JLL Research
…and while Class A’s share of absorption is higher in the
suburbs, it also displays a downward trend
20
116.9%
97.9%
62.3%
75.1%
167.8%
102.5%
84.3% 85.3%
43.2%
73.4% 72.8% 70.3%
61.1%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
2011 2012 2013 2014
Cla
ss A
sha
re o
f qua
rter
ly a
bsor
ptio
n
Source: JLL Research
A variety of secondary markets posted strongest Class B
absorption in Q1 2014
21
2.3%
1.6%
1.4% 1.3%
1.2% 1.1%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Fairfield County Fort Lauderdale Salt Lake City Austin Atlanta Detroit
YT
D C
lass
B n
et a
bsor
ptio
n (%
of i
nven
tory
)
Source: JLL Research
U.S. average
Still, Class A continues to trump Class B according to most
indicators
22
Source: JLL Research
of absorbed space in 2014
has been Class A
per square foot difference
between Class A and B space…
rate at which Class A rates are growing
compared to Class B year-on-year
difference between Class A and
Class B total vacancy
Total vacancy steady at 16.6 percent, in part due to new supply
beginning to come to the market
23
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
19.0%
2009 2010 2011 2012 2013 2014
Tota
l vac
ancy
(%
)
Source: JLL Research
Still, vacancy levels remain near historical highs
24
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Tota
l vac
ancy
(%
)
Source: JLL Research
Total vacancy stable for Class A and B space, down for Class C
25
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
2010 2011 2012 2013 2014
Tota
l vac
ancy
(%
)
Class A (CBD) Class A (suburban) Class B (CBD)
Class B (suburban) Class C (CBD) Class C (suburban)
Source: JLL Research
Industry Real estate footprint Most affected markets
State government Contracting California, Illinois, New Jersey
Federal government Contracting Washington, DC
Media/print Contracting LA, NYC
Finance/banking Contracting NYC, Charlotte, Chicago, Palm Beach, Pittsburgh
Law firms Contracting (rightsizing) Washington, DC, NYC, SF, Atlanta, LA
Consulting Contracting (rightsizing) NYC, Chicago, Washington, DC
Accounting Contracting (rightsizing) Chicago, NYC, LA
Telecom Stable NJ, Dallas, Atlanta
Retail/consumer goods Stable NYC, Atlanta, Los Angeles
Education Growing Everywhere
Media (digital and TV) Growing Atlanta, NYC, LA, Philadelphia, Washington, DC
Green energy/clean technology Growing Pittsburgh, Silicon Valley, Denver
Real estate (residential) Growing Southern CA, Nevada, AZ, FL, GA, Carolinas
Technology Growing Silicon Valley, San Francisco, Austin, Seattle, Portland, Midtown South NYC, Cambridge, MA
Shared office space providers / co-working spaces Growing All markets particularly coastal markets and Chicago
Natural gas/oil/energy Growing Denver, Houston, Dallas, Pittsburgh
Biotech/pharmaceutical Growing San Francisco, San Diego, NJ/Phil, Boston, RDU
Office growth being driven by atypical tenant industries
26
Source: JLL Research
Demographics and technology are driving productivity and
utilization and the next evolution of office space use
27
Source: JLL Research
15%
space reduction by
U.S. law firms and
financial services
relocating
72%
of global CREs plan
to aggressively
increase density in
next 3 years
150
Square-foot-per-
employee average
target density, down
from 225 in 2009
50%
of the U.S.
workforce was
baby boomers in
2010. Gen Y will
be 50% by 2020
Many of these changes show stark pre- and post-recession
contrasts
28
Source: JLL Research
Floor plates
Floor plates are up
from 25,000
square feet before
the recession to
60,000 square
feet.
Personal space
Before the
recession,
employees had
around 300 s.f. per
person; now they
have 200 s.f.
Interaction
Employees have
gone from rarely
running into others
to a nine-in-ten
chance of bumping
into a coworker.
Building features
Aesthetic and
building features
such as increased
roof heights and
floor-to-ceiling
windows are “in.”
And, as a result, law firms are shifting
29
Source: JLL Research
15.2% Giveback by law firm
across the U.S. when
relocating
20.5% Giveback by law firm
across the top seven U.S.
markets when relocating
24.7% Giveback by law firm
across DC when
relocating
• Going digital
• Elimination of law libraries
• One-sized fits all office
• Higher administrative ratios
• Migration to glass boxes
• Migration to long and lean
• Migration to smaller floorplates
Consulting and accounting are shifting
30
Source: JLL Research
25.0% Giveback by consulting
firms across the U.S.
when relocating
225 s.f. Average space per
consultant in
years past
90 s.f. Average space per
consultant in the most
efficient firms today
• Benching
• Work flexibly and client officing
• Offices gone, collaboration rooms in
• Increasingly looking at new
construction to meet efficiency
standards
• Industry giving back most space
Technology companies are shifting
31
Source: JLL Research
22.0% Percent increase in
high-tech service jobs
since 2009
14.2% Total vacancy in core tech
markets, compared to 16.6
percent nation-wide
11.2% Growth in
core tech market
rents in 2013
• Benching is standard
• Less personal space, more shared
and amenity space
• “Open hangar” design preferred
• Migration to Class B+ with
character
• Space viewed as core to culture
• Remote work is waning
Banks are shifting
32
Source: JLL Research
10.1% Give-back by average bank
across the U.S. when
renewing (flat headcount)
86.0% Percent of banking
transactions that no
longer need a teller
66.0% Percent of surveyed
banks planning to
reduce CRE footprint
• Regulation and cost pressures
forcing portfolio consolidation
• Offices shrinking
• Business units competing
• Branch reductions common
• Increasing importance of back
office (second- and third-tier
markets)
• Remote working increasing
Even the federal government is shifting
33
Source: JLL Research
170 s.f. Target utilization rate per
employee for federally
leased space
$1.7 billion Amount spent annually
by the GSA for properties
deemed underutilized
15.9% Average give-back by
GSA across Metro DC
in FY 2013
• Telecommuting
• Benching
• Co-locations
• Minimal funds to implement
• Consolidations in low cost
buildings/submarkets
• Migration to off-center locations
• Disposition of underutilized
assets.
Slower growth in office-using employment mirrored in stalling
vacancy decline
34
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
19.0%
26,500
27,000
27,500
28,000
28,500
29,000
29,500
30,000
2011 2012 2013 2014
Tota
l vac
ancy
(%
)
Offi
ce-u
sing
em
ploy
men
t (th
ousa
nds)
Office-using employment (thousands) Total vacancy (%)
Source: JLL Research
CBD and suburban vacancy remain unchanged at 13.9 and 18.2
percent, respectively; CBD approaching historic norms
35
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
21.0%
23.0%
Tota
l vac
ancy
(%
)
Source: JLL Research
Sublease space stable at 54.4 million square feet, declines
marginally as vacancy remains same in Q1
36
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
2009 2010 2011 2012 2013 2014
Sub
leas
e sp
ace
(s.f.
)
Source: JLL Research
Marketed rents increase 1.2 percent, registering their 13th straight
quarter of increases and second-highest growth during recovery
37
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2008 2009 2010 2011 2012 2013 2014
Qua
rter
ly r
ent g
row
th (
%)
Source: JLL Research
Rental growth fastest in CBD Class A (+2.2 percent year-on-year)
space, driving national increases
38
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
2010 2011 2012 2013 2014
Ave
rage
ask
ing
rent
s ($
p.s
.f.)
Class A (CBD) Class A (suburban) Class B (CBD)
Class B (suburban) Class C (CBD) Class C (suburban)
Source: JLL Research
U.S. office market moves farther along the clock as more markets
shift into landlord-favorable territory
39
Source: JLL Research
Peaking
phase
Falling
phase
Rising
phase
Bottoming
phase
Austin, Seattle-Bellevue
Dallas, San Francisco Peninsula
Columbus, Long Island, Orlando
Miami, Philadelphia, Portland, San Diego
Chicago, Cincinnati, Cleveland, Fairfield County,
Milwaukee, Minneapolis, Oakland-East Bay,
Raleigh-Durham, Richmond, San Antonio
Charlotte, Detroit, Hampton Roads, Phoenix
Sacramento, St. Louis, Westchester County
Salt Lake City, Tampa, United States
Houston
Baltimore, Fort Lauderdale,
Washington, DC
West Palm Beach Indianapolis, Los Angeles, Orange County
Boston, Denver
New York, Pittsburgh
San Francisco, Silicon Valley
Atlanta, Jacksonville
New Jersey
Faster rent growth in CBDs contributing to faster movement
along clock
40
Source: JLL Research
Peaking
phase
Falling
phase
Rising
phase
Bottoming
phase
Austin, Houston
Charlotte, Cincinnati, Cleveland, Dallas,
Detroit, Milwaukee, Raleigh-Durham
Miami, Seattle CBD
Downtown (New York),
Hampton Roads, San Antonio
Greenwich CBD, Indianapolis, Portland,
Salt Lake City, Stamford CBD
Columbus, Fort Lauderdale,
Richmond, San Diego,
Washington, DC
Baltimore, Sacramento
Chicago, Minneapolis
West Palm Beach
Atlanta, Jacksonville, Philadelphia,
Tampa, United States
Boston, Midtown (New York), Pittsburgh
Los Angeles, Oakland CBD,
Orlando, White Plains CBD
Midtown South (New York)
San Francisco
Denver, San Jose CBD
Phoenix, St. Louis
Suburban markets still struggling with elevated vacancy, with
more submarkets still at the bottom of the cycle
41
Source: JLL Research
Peaking
phase
Falling
phase
Rising
phase
Bottoming
phase Austin, Pittsburgh
Dallas, Silicon Valley
Indianapolis, Jacksonville,
Long Island (Nassau), Orange County,
Portland (Westside), United States
Long Island (Suffolk)
Chicago, Columbus, Detroit, Miami,
Northern Delaware, Portland
(Eastside), Raleigh-Durham, Seattle
Cincinnati, Cleveland, Minneapolis,
Oakland-East Bay, Sacramento, San Antonio
Salt Lake City
Atlanta, Baltimore, Boston, Lehigh Valley, Milwaukee,
Philadelphia, Portland (Vancouver), San Diego, St. Louis
Houston
Charlotte, Fairfield County, Hampton Roads,
Phoenix, Westchester County
Central New Jersey, Fort Lauderdale,
Northern New Jersey, Orlando
West Palm Beach
Denver, Richmond, Tampa
Cambridge, San Francisco
Los Angeles
San Francisco Peninsula
Bellevue CBD
Northern Virginia,
Suburban Maryland
Southern New Jersey
CBD rent growth jumps faster than suburban, remains more
volatile
42
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2011 2012 2013
Qua
rter
ly r
ent g
row
th (
%)
CBD rent growth Suburban rent growth
Source: JLL Research
CBD average: 1.0%
Suburban average: 0.2%
In turn, faster CBD rent growth results in rent gap widening by
$0.38 per square foot in Q1 2014…
43
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
2010 2011 2012 2013 2014
Ave
rage
ask
ing
rent
($
p.s.
f)
CBD Suburbs
Source: JLL Research
$11.36
$15.86
…as did the Class A premium compared to overall rents, which
hit a recovery high of $4.97 per square foot
44
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
2010 2011 2012 2013 2014
Cla
ss A
pre
miu
m (
$ p.
s.f.)
Source: JLL Research
Concessions wobbling, but overall decline in TI allowances and
free months compared to 2012
45
3.5
4.1
5.1
6.1 6.2
5.7 5.5
5.3 5.5
$23.00
$24.00
$25.00
$26.00
$27.00
$28.00
$29.00
$30.00
$31.00
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2006 2007 2008 2009 2010 2011 2012 2013 2014
TI a
llow
ance
($
p.s.
f.)
Fre
e m
onth
s of
ren
t
Free months of rent TI allowance ($ p.s.f.)
Source: JLL Research
As vacancy falls, so does leverage for tenants and tenant build-
out allowances from landlords
46
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
19.0%
$26.00
$26.50
$27.00
$27.50
$28.00
$28.50
$29.00
$29.50
$30.00
$30.50
2009 2010 2011 2012 2013 2014
Tota
l vac
ancy
(%
)
TI a
llow
ance
($
p.s.
f.)
TI allowance ($ p.s.f.) Total vacancy (%)
Source: JLL Research
New supply coming to market slowly increasing, but still well
below historic norms
47
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Com
plet
ions
(s.
f.)
Source: JLL Research
Average annual completions
The vast majority of new completions are Class A, with an
increasing share in the suburbs
48
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2010 2011 2012 2013 YTD 2014
YT
D c
ompl
etio
ns (
s.f.)
Class A (CBD) Class A (suburban) Class B (CBD)
Class B (suburban) Class C (CBD) Class C (suburban)
Source: JLL Research
Fewer than one-third of markets have no construction underway
as development activity jumps to 56.0 million square feet
49
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Und
er c
onst
ruct
ion
(s.f.
)
Source: JLL Research
The majority of new construction is now in suburbs rather than
CBDs
50
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014
Sha
re o
f con
stru
ctio
n
CBD Suburbs
Source: JLL Research
32.0 percent of markets reported an increase in construction
starts…
51
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014
Up Neutral Down
Source: JLL Research
…resulting in 11.8 million square feet of starts in the first quarter
alone
52
11,843,789
18,490,244 17,558,896
22,251,850
11,818,372
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2010 2011 2012 2013 YTD 2014
Con
stru
ctio
n st
arts
(s.
f.)
Source: JLL Research
Houston’s development boom dominated national
groundbreakings during Q1 of 2014
53
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Con
stru
ctio
n st
arts
(s.
f.)
Source: JLL Research
A gap of another 15 to 18 months until the next cycle of developments deliver in late 2015 will yield continued market tightening and consistent rent growth exceeding 12 percent around the country through 2015.
COPYRIGHT © JONES LANG LASALLE IP, INC. 2014
John Sikaitis
Managing Director – Office and Local Markets Research
+1 202 719 5839
John.Sikaitis@am.jll.com
Phil Ryan
Research Analyst, Office and Economy Research
+1 202 719 6295
Phil.Ryan@am.jll.com
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