by Shane Henson — June 21, 2013—As occupiers look to embrace more efficient workplace strategies and attract new talent, they are showing an increased preference for Class A office space in central business districts (CBDs) and “creative space,” typically characterized by large floor plates with open configurations, according to the latest analysis from CBRE Group Inc., a full-service real estate services company.
The first quarter 2013 U.S. Office OccupierView reports that occupiers are seeking urban locations in proximity to public transportation, housing, restaurants and nightlife to attract and retain younger workers as the “war for talent” heats up. As a result, demand for well-located CBD office space is strengthening in Atlanta, Boston and Washington, DC, and is driving up rents for Class A space in Boston and Denver.
“Many occupiers, particularly in the technology sector, are placing a premium on close collaboration and regular interaction as a way to foster innovation among creative knowledge workers,” said Brook Scott, CBRE’s head of Americas occupier research, global research and consulting. “Demand for creative space that facilitates this collaboration and interaction continues to take hold in major markets across the country.”
The report notes that the anemic pace of new construction in recent years is paving the way for an acceleration of rent growth. Delivery of completed office projects was modest during the first quarter of 2013. There is 16.6 million square feet of new office space currently under construction in downtown major markets, with another 17.8 million square feet expected to break ground over the next two years, says CBRE.
According to the report, the lack of new supply and modest demand will limit tenant options in certain major markets, putting upward pressure on rents. The CBRE analysis projects rents to increase in the majority of major downtown markets over the next 12 months. “The demand for Class A and creative space will outstrip the supply and elevate rents,” added Scott.