U.S. office market statistics: Q2 2014

U.S. office sector posts highest

quarterly absorption of the recovery

United States Office Review Q2 2014

Rents are running away from tenants in urbanized quality cores with level of increase expected to escalate due to capital demand (investment sales) having just as big of an impact on rent growth over the next 24 months as leasing demand due to increasingly bullish underwriting projections from sales / refinancings.

Fundamentals are tightening across markets, particularly

absorption and development

2

Source: JLL Research

Leasing activity • Q2 posted 61.9 million square feet of leasing activity.

• Leasing levels up 6.2 percent from Q1 2014.

• Compared to Q2 2013, leasing volume is up 0.2 percent.

Absorption

• Absorption levels increase, resulting in the 17th consecutive quarter of occupancy growth.

• The 13.9 million square feet of net absorption during Q2 represents the highest quarterly occupancy growth

during this cycle so far.

• This quarter’s biggest contributors to absorption were New York, Boston, Houston, Chicago, Philadelphia

Seattle, Los Angeles and San Francisco.

Vacancy • Vacancy dropped by 30 basis points to a recovery low of 16.3 percent. This comes after two quarters at 16.6

percent.

• Both CBDs and suburbs played a role in this decline, falling to 13.7 percent and 18.0 percent, respectively.

Rents

• Despite improved market conditions, asking rents declined by 0.7 percent to $30.00 per square foot. This was

mostly the result of blocks of quality Class A space being taken off the market in many markets, compounded

with falling rents and elevated vacancy in Washington, DC.

• In supply-constrained CBDs, this was more pronounced, as rents fell by 1.0 percent. In the suburbs, asking

rents increased slightly to $24.23 per square foot.

Construction

• YTD construction starts have totaled almost 21.0 million square feet. This is nearly equal to all starts posted in

2013.

• Although Houston remains the leader in construction, 18 markets registered more than 1.0 million square feet

as volumes have jumped by 38.4 percent to 65.4 million square feet nationally.

Nearly half of all markets (49.0 percent) reported an increase in

leasing activity in Q2 compared to Q1

3

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014

Up Neutral Down


In turn, leasing volumes rose by 6.2 percent to 61.9 million

square feet after two consecutive quarters of declines

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.)


While 0.2 percent higher than Q2 2013 leasing activity, this was

slightly below the Q2 average since 2007

5

62,856,296

62,499,312

54,446,297

66,724,307

67,948,333

63,411,335

61,762,387

61,906,383

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

Q2 2007

Q2 2008

Q2 2009

Q2 2010

Q2 2011

Q2 2012

Q2 2013

Q2 2014

Leasing activity (s.f.)


Outside of top markets, leasing activity relatively even across

geographies, similar to previous quarters

6

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000N

ew Y

ork

Chi

cago

Was

hing

ton,

DC

Los

Ang

eles

Bos

ton

Phi

lade

lphi

aD

alla

sS

an F

ranc

isco

Ora

nge

Cou

nty

New

Jer

sey

Den

ver

San

Die

goS

eattl

eP

hoen

ixS

ilico

n V

alle

yH

oust

onM

inne

apol

isP

ortla

ndS

t. Lo

uis

Fai

rfie

ld C

ount

yA

ustin

Cha

rlotte

Det

roit

Bal

timor

eO

akla

nd-E

ast B

ayIn

dian

apol

isM

iam

iP

ittsb

urgh

San

Fra

ncis

co P

enin

sula

Atla

nta

Sac

ram

ento

Kan

sas

City

Tam

paC

inci

nnat

iH

ampt

on R

oads

Cle

vela

ndC

olum

bus

Ral

eigh

-Dur

ham

Orla

ndo

Wes

tche

ster

Cou

nty

Jack

sonv

ille

For

t Lau

derd

ale

Wes

t Pal

m B

each

Milw

auke

eLo

ng Is

land

Sal

t Lak

e C

ityS

an A

nton

ioR

ichm

ond

Leas

ing

activ

ity (

s.f.)


38.9% 20.6% 40.5%

Q2 represents highest quarterly absorption throughout the

recovery so far (13.9 million square feet)

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

)


15-year trailing annual average

As a result, YTD absorption represents roughly 56.4 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

)


15-year trailing

annual average

Class A space, both in CBDs and suburbs, continues to lead the

way in take-up of space

9

-10,000,000

-5,000,000

0

5,000,000

10,000,000

15,000,000

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)


Although tech and energy continue to make strong gains in

absolute terms, their share of absorption is decreasing as the

recovery gains momentum elsewhere

10


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

7.5%

25.2%

16.7% 24.6%

26.0%

2014

Only nine markets have experienced a net loss of occupancy

YTD, of which less than half are more than -200,000 square feet

11

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000N

ew Y

ork

Hou

ston

Atla

nta

Bos

ton

Sili

con

Val

ley

Los

Ang

eles

Pho

enix

Den

ver

Chi

cago

Sea

ttle-

Bel

levu

eB

altim

ore

Dal

las

Ora

nge

Cou

nty

San

Fra

ncis

coC

harlo

tteP

ortla

ndD

etro

itM

iam

iP

hila

delp

hia

St.

Loui

sS

alt L

ake

City

Milw

auke

eR

alei

gh-D

urha

mW

est P

alm

Bea

chC

inci

nnat

iF

ort L

aude

rdal

eF

airf

ield

Cou

nty

San

Fra

ncis

co P

enin

sula

Long

Isla

ndK

ansa

s C

ityM

inne

apol

isA

ustin

Sac

ram

ento

Col

umbu

sIn

dian

apol

isC

leve

land

San

Die

goH

ampt

on R

oads

Oak

land

-Eas

t Bay

Jack

sonv

ille

San

Ant

onio

Tam

pa B

ayW

estc

hest

er C

ount

yP

ittsb

urgh

Ric

hmon

dO

rland

oN

ew J

erse

yW

ashi

ngto

n, D

C

YT

D n

et a

bsor

ptio

n (s

.f.)


Energy, tech and Sunbelt markets all posting above-average

absorption; Sunbelt surpassing energy in some cases

12

0.5%

1.0%

1.4%

1.0% 0.9%

1.0% 0.9%

2.1%

1.3% 1.4%

1.3%

0.7%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

YT

D n

et a

bsor

ptio

n (s

.f.)


Energy Tech Sunbelt

U.S. average

Gains in NYC, Boston and much of the Sunbelt push up East

Coast to top share of absorption during Q2

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


Even though Atlanta and South Florida are nearing 2013

absorption levels already, rest of the East Coast is catching up

14


-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

4,000,000

2010 2011 2012 2013 2014

Net

abs

orpt

ion

(s.f.

)

Atlanta Chicago Los Angeles Miami Philadelphia Phoenix

Diversified markets hit another recovery high with 3.1 million

square feet of occupancy gains, this quarter led by Chicago

15


Atlanta and Phoenix have

absorbed a combined 13.0

million square feet since

2010, or 65.1 percent of

cumulative total.

Quarterly Class B absorption over the past four quarters is taking

place 3.4x faster than from 2010 to Q2 2013…

16


10,975,302 10,604,042

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2010-Q2 2013 Past four quarters

Cla

ss B

net

abs

orpt

ion

(s.f.

)

783,950 s.f. per quarter 2,651,011 s.f. per quarter

…although 5.8x as much Trophy and Class A space has been

absorbed than B and C during the same time period

17


Trophy and Class A

net absorption

118.4 m.s.f.

2010-2014

Class B and C net

absorption

20.5 m.s.f.

2011-2014

Class A space saw its highest share of quarterly absorption this

quarter since Q2 2012

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%

82.3%

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


At the same time, all total net absorption took place in Class A

space during Q2

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%

100.9%

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


Although higher than in Q1 2014, suburbs display the opposite,

trend, with only two-thirds of absorption in Class A space in Q2

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% 67.6%

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


Limited Class A options, particularly for larger tenants, have

boosted YTD Class B absorption in certain CBDs

21

2.7%

2.3% 2.2%

2.1%

1.8%

1.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Milwaukee Oakland CBD Greenwich CBD Atlanta Phoenix Silicon Valley CBD

YT

D C

BD

Cla

ss B

net

abs

orpt

ion

(% o

f inv

ento

ry)


U.S. average

Still, Class A continues to trump Class B according to most

indicators

22


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

Due to high levels of take-up, total vacancy fell by 579,661

square feet over the quarter to 16.3 percent, or 30 basis points

23

15.0%

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

(%

)


Still, vacancy levels remain closer to historical highs than lows

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

(%

)


Total vacancy is stable or declining in all segments of the market;

CBD Class A experiences largest drop (-50 basis points)

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)


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


Demographics and technology are driving productivity and

utilization and the next evolution of office space use

27


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


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

change 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


15.2% Giveback by law firm

across the U.S. when

relocating


across the top seven U.S.

markets when relocating


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


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


22.0% Percent increase in

high-tech service jobs

since 2009

13.6% Total vacancy in core tech

markets, compared to 16.3

percent nation-wide

2.2% Growth in

core tech market

rents in 2014

• 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


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


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.

As office-using employment increases by 199,000 net new jobs,

vacancy declines to 16.3 percent

34

15.0%

15.5%

16.0%

16.5%

17.0%

17.5%

18.0%

18.5%

19.0%

26,000

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 (%)


CBD and suburban vacancy both inch downward, this quarter to

13.7 percent and 18.0 percent, respectively

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

(%

)


Following declines in total and direct vacancy, sublease space

falls to 53.7 million square feet, or 1.3 percent quarter-on-quarter

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.

)


After 13 consecutive quarters of growth, rents decline slightly

due to Class A space removals and drops in Washington, DC and

Downtown Manhattan

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 (

%)


Year-on-year, rents are still rising faster than before, up 2.7 and

1.7 percent for Class A and B space, respectively

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.)




U.S. office market continues to move along the clock as fewer

available options exist for tenants, spurring development

Peaking

phase

Falling

phase

Rising

phase

Bottoming

phase

Atlanta, Indianapolis, Jacksonville Los Angeles, Salt Lake City, Tampa, United States

Miami, Milwaukee, Oakland-East Bay,

Philadelphia, Raleigh-Durham, Richmond, San Diego

Columbus, Long Island, Orlando,

Washington, DC

Dallas, San Francisco Peninsula

Charlotte, Chicago, Cincinnati, Fairfield County, Fort

Lauderdale, San Antonio, St. Louis, Westchester County

Houston, San Francisco, Silicon Valley

West Palm Beach

Cleveland, Minneapolis, Orange County, Phoenix

New Jersey

Baltimore, Detroit, Hampton Roads, Kansas City,

Sacramento

New York, Portland

Austin, Pittsburgh, Seattle-Bellevue

Boston, Denver


Peaking

phase

Falling

phase

Rising

phase

Bottoming

phase

CBDs remain in the lead, with falling vacancy pushing rents in

cores of San Francisco, Houston and Portland up 4.0 percent

Atlanta, Jacksonville, Philadelphia

Boston, New York (Midtown), Tampa,

United States

Seattle, Miami

Charlotte, Dallas, Fort Lauderdale, Los Angeles,

Milwaukee, Orlando, Westchester County

Austin, Houston

Baltimore, Sacramento,

West Palm Beach

Kansas City, New York (Downtown),

Phoenix, Richmond, San Antonio

Fairfield County, Indianapolis, Minneapolis

Columbus, San Diego,

Washington, DC

Pittsburgh, Portland, San Jose CBD

Chicago, Cleveland,

Oakland CBD, Raleigh-Durham

New York (Midtown South), San Francisco

Denver

Cincinnati, Detroit

Salt Lake City

St. Louis


Peaking

phase

Falling

phase

Rising

phase

Bottoming

phase

The suburbs are also on the rise, having witnessed quarterly rent

growth of 3.6 percent year-on-year

Cleveland, Jacksonville, Long Island (Nassau),

Milwaukee, Orange County, Portland, St. Louis,

United States

Denver, Indianapolis, Tampa

Chicago, Detroit, Miami,

Northern Delaware

Long Island (Suffolk)

Dallas, Silicon Valley

Atlanta, Baltimore, Bellevue (non-CBD), Boston,

East Bay, Lehigh Valley, Philadelphia, San Diego, Seattle

Houston, San Francisco (non-CBD)

Northern and Central New Jersey,

Northern Virginia, Orlando,

Suburban Maryland, West Palm Beach Cincinnati, Fairfield County, Hampton Roads (South), Minneapolis,

Oakland Suburbs, Sacramento, San Antonio, Westchester County

Cambridge, San Francisco Peninsula

Charlotte, Fort Lauderdale, Hampton Roads

(Peninsula), Kansas City, Raleigh-Durham

Phoenix, Richmond, Salt Lake City

Austin, Los Angeles

Pittsburgh

Bellevue CBD

Southern New Jersey


After spiking, CBD rents fall due to removals of quality space;

suburban rents on the up quarterly and are more stable

42

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2011 2012 2013 2014

Qua

rter

ly r

ent g

row

th (

%)

CBD rent growth Suburban rent growth


CBD average: 0.9%

Suburban average: 0.2%

As a result of drops in CBDs due to removals and steady

improvement in the suburbs, the gap has narrowed by $0.27 per

square foot

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


$11.36

$15.59

A similar trend has emerged regarding the Class A premium vs.

overall rents, which is down $0.05 per square foot to $4.97 per

square foot compared to Q1

44

$3.40 $3.49 $3.49

$3.53

$3.68

$3.81

$3.97 $3.99

$4.21 $4.26

$4.37 $4.38

$4.86

$4.71

$4.82 $4.76

$4.97 $4.92

$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.)


After jumping up earlier in the year, concessions have flatlined of

late

45

3.5

4.1

5.1

6.1 6.2

5.7 5.5

5.3 5.3

$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.)


New supply coming to market is slowly increasing, but still well

below historic norms

46

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.)


Average annual completions

The vast majority of new completions are Class A, the majority

of which is arriving in suburban markets rather than CBDs

47

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.)




Construction volumes jumped 38.4 percent compared to YE

2013, led by Houston

48

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.

)


The majority of new construction is now in suburbs rather than

CBDs and the share continues to grow thanks to Silicon Valley,

Dallas, Austin and Houston, in particular

49

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


35.3 percent of markets reported an increase in construction starts

over the quarter…

50

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014

Up Neutral Down


…resulting in almost 21.0 million square feet of starts during the

first half of the year, nearly equivalent to all of 2013’s starts

51

11,843,789

18,490,244 17,558,896

22,251,850

20,986,559

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.)


Houston once again leads construction starts, with Silicon Valley

and Washington, DC close behind

52

2,545,988

1,982,305

1,579,746

743,205 648,170

358,000 321,000 247,836 242,969

188,968 118,000 100,000 60,000 32,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Con

stru

ctio

n st

arts

(s.

f.)


Strong preleasing activity is helping new developments go ahead,

but is also reducing the ability to ease supply constraints

53


San Francisco: 65.0%

Washington, DC: 44.0%

New York: 54.6%

Chicago: 41.8%

Atlanta: 55.0%

Houston: 55.5%

Seattle: 65.0%

Most landlords and investors of U.S. office product are optimistic about the recovery across most markets, but more pessimistic in terms of placing all of their capital allocations ahead. Already challenges have developed for capital allocation in many coastal gateways and we are seeing the same yield compression and broader buyer pool develop in more adjusted risk-adjustment segments too recently.

COPYRIGHT © JONES LANG LASALLE IP, INC. 2014

John Sikaitis

Managing Director – Office and Local Markets Research

+1 202 719 5839

[email protected]

Phil Ryan

Research Analyst, Office and Economy Research

+1 202 719 6295

[email protected]

>> Click to access our complete report on the

current state of the U.S. office market

http://marketing.am.jll.com/acton/form/3030/00ff:d-0001/0/index.htm

U.S. office market statistics: Q2 2014

Real Estate

Transcript of U.S. office market statistics: Q2 2014