by Brianna Crandall — December 27, 2017 — Just how much will companies pay to occupy one of America’s most desired office addresses? According to global specialized real estate services and investment management firm JLL’s 2017 Most Expensive Streets study, which looks at the priciest US office space, those high-profile strips command an average asking rent of $48.65 per square foot, a 46.9 percent premium compared to the rest of the country’s office rents.
And they remain as popular as ever, says JLL. Just 12.8 percent of the nation’s most expensive real estate is vacant — a full 250 basis points lower than the US average.
Location, location, location?
While traditional drivers like the financial, law and consulting industries continue to make their presence felt on these streets — think Fifth and Greenwich Avenues — tech is having an outsized effect, according to the report. In fact, five of the top 10 streets in the ranking are tech hubs.
According to Scott Homa, JLL director of US Office Research:
As tech companies mature, their space needs begin to mirror those of traditional white-collar industries in these expensive locations. Sand Hill Road is no longer the only example of this. We see it in cities like Boston, Cambridge and Austin, where major tech players have leased large blocks of premium space.
JLL managing director of Capital Markets Frank Petz added:
We have seen a shift in tenancy and more migration between Cambridge and Boston. The proliferation of life science players in Cambridge has dislodged many traditional office users, and even tech companies. Cambridge now has vacancy rates near zero and rents at an all-time high, and Boston is benefitting as tech tenants cross the river to take advantage of the value proposition the city offers.
Developing an expensive taste
Adding to the surge in demand for these addresses is exceptional pre-leasing on new developments. For instance, the delivery of FMC Tower on 30th Street in Philadelphia has cemented University City as one of the most desirable office locations in the region’s core. That street is now the most expensive in Philadelphia, a city in the midst of a tech, media, education and health expansion. Vacancy on 30th Street is just 7.1 percent, and office rents carry an 83.9 percent premium, a number that is sure to increase as the Schuykill Yards development matures.
Similarly, Penn Avenue in Pittsburgh, now the city’s most expensive corridor, is benefitting from the presence of a major tech company anchoring the Bakery Square development. Office rents on Penn Avenue carry a 72.1 percent premium over the rest of the city.
Chris Roeder, JLL managing director of Agency Leasing, stated:
In the battle for talent, companies are always looking for something new to give them an edge. Developers recognize that these high-end amenities — roof decks, open and collaborative space, etc. — will draw the big-name tenants that help developments stand out.
JLL’s 2017 Most Expensive Streets for office rents are:
- Sand Hill Road, San Francisco, CA: Home to some of the most prominent venture capital firms, Sand Hill Road is one of the Bay Area’s most high-profile business addresses. Office rents here average $119.38 per square foot, and have hit as high as $185.
- Fifth Avenue, New York, NY: Popular among hedge funds, investment banks and law firms, Fifth Avenue remains a New York landmark and one of the country’s most glamorous addresses. Average rents achieved $116.04 per square foot, with top rents of $185 coming at a 157.9 percent premium compared to the rest of the market, helping propel Fifth Avenue up one place from the previous report.
- Mission Street, San Francisco, CA: Mission Street is home to a unique blend of prominent tech and financial services tenants, making it one of the best-recognized addresses in San Francisco. With an average asking rent of $93.68 per square foot, Mission Street boosted its ranking by two spots since 2015.
- Main Street, Cambridge, MA: Main Street is at the heart of Kendall Square in Cambridge and a hub for the top life sciences and tech companies globally. An address here comes with average rents of $90 per square foot, a 143.6 percent premium compared to Boston at large. Vacancy is also in the mid-single digits at a miniscule 5.3 percent.
- Greenwich Avenue, Fairfield County, CT: Housing a variety of hedge funds and financial services companies, Greenwich Avenue is also lined with upscale retailers and restaurants. Rents average $86.53 per square foot, with top rents coming in at $101, a whopping 177.4 percent premium compared to the rest of Fairfield County.
- Pennsylvania Avenue, Washington, DC: Pennsylvania Avenue not only serves as the address of the White House, it’s also home to a variety of prestigious law firms and lobbying organizations and offers some of the best views in Washington, DC. At $80 per square foot, sharing a street with the White House and the Capitol means paying a 95.1 percent premium compared to the rest of the market. The street maintained its ranking from 2015.
- Ocean Avenue, Los Angeles: Ocean Avenue runs north to south along the Pacific Coast, offering stunning ocean views and easy access to the beach. But gaining access to the famed strip, where rents average $78.20 per square foot, is anything but easy: vacancy is just 7.1 percent.
- Boylston Street, Boston: Boylston Street is the premier office market in Boston’s CBD. The area attracts primarily financial and legal services firms. At $68.87 per square foot, Boylston Street was supplanted from its previous ranking at No. 7.
- Royal Palm Way, West Palm Beach: With a concentration of high net worth individuals living in the surrounding areas, Royal Palm Way is home to many financial institutions and wealth management companies. Staying put in the ninth spot on the list, Royal Palm Way averages $61.80 per square foot, a 96.1 percent premium compared to the rest of West Palm Beach.
- Congress Avenue, Austin: Traditionally home to financial and state-government users, a wave of new office, multifamily and retail developments has transformed Congress Avenue into one of the market’s most dynamic corridors. A newcomer to the list’s top 10, Congress Avenue averages $55.20 per square foot and boasts a tiny 9.5 percent vacancy.
For more information on the report, an interactive map and the full rankings, visit the America’s 2017 Most Expensive Streets page on the JLL Web site.