JLL forecasts positive outlook for 2017 office market, slight rise in vacancy rates
- A first-quarter 2017 report from real estate company JLL predicts continued growth and higher rents for the U.S. office market this year, according to Commercial Property Executive.
- JLL representatives said tenants are paying more for high-quality space, but the current slight oversupply on the market has led to higher vacancy rates. To combat this trend and attract tenants, some building owners have started free rent programs and have raised buildout allowances.
- The small glut in supply should not be long-term, however, as new office construction projects dipped in the first quarter of 2017, which could help balance out the market, according to JLL.
Dodge Data & Analytics' latest report found that office construction starts rose 41% in March compared to February, but the overall trend has been slower growth, despite high-profile office projects like the $3 billion One Vanderbilt tower breaking ground in Manhattan.
At a time when owners are competing for tenants, the extras count even more, leading to heightened focus on office amenities. With more millennials entering the workforce, developers have come up with perks that cater to a busy lifestyle, like emergency daycare and food delivery. Because many of these new offices are located in "live-work-play" areas, building owners are also offering bonuses like bike parking and discounts on benefits that can be utilized during personal time.
The way office space is structured and managed is also undergoing a transformation, with a focus on collaboration and flexible space rather than the corner-office approach that previously dominated the market. The demands of technology also require that buildings be outfitted with the latest communication tools, like distributed antenna systems, which allow for seamless cell phone use and Wi-Fi use throughout the building.
In order to benefit from the latest and greatest in office design, some large companies have handed over office management to companies like WeWork. The company has made inroads into the industry with its shared workspace concept but recently announced an initiative that will see it designing and managing office space for clients who want the "cool" design and management style for which the company is famous but not the responsibility and hassle of doing it themselves.
- Commercial Property Executive Office Outlook Positive for 2017
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