Download - Studley SERI2003 Report
SERI2003Studley Effective Rental Index
SERI2003
C O N T E N T S
Introduction 1
Effective Rents 3
Tenant Effective Rent Comparison 3
Landlord Effective Rent Comparison 5
Rental Trends 7
Rental Components 17
Components of Total Rent 17
Total Rent Comparison 19
Net Rent Comparison 21
Operating Expense Comparison 22
Real Estate Tax Comparison 23
Tenant Electricity Comparison 24
Suburban Analysis 25
Suburban Tenant & Landlord Effective Rent Comparison 25
Statistical Summary 27
IntroductionIN
TR
OD
UC
TIO
N
The Studley Effective Rental Index (SERI) remains the commercial real estate
industry’s most exhaustive study of effective rental rates for prime Class A
office properties. The SERI offers real world numbers that reflect actual
negotiated deal terms and allow for market lease concessions. Other industry
analyses typically quote asking rents based on broker listings.
In order to create a realistic depiction of the market, Studley analysts examine
recent office leases to determine the effect of factors that add to the
complexity of all transactions – concessions given to tenants and expenses
such as real estate taxes and operating expenses that are incurred by
landlords. The SERI investigates 15 bellwether central business districts and
markets: Atlanta, Boston, Chicago, Dallas, Denver, Houston, Downtown Los
Angeles, West Los Angeles, Miami, New Jersey, Downtown New York,
Midtown New York, Philadelphia, San Francisco, and Washington, D.C.
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SERI2003
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The SERI explores rental information in several ways:
• A statistical summary – a quick, illustrated look at vital statistics from
year-end 2002 compared with year-end 2001 data.
• Effective rental trends – individual snapshots of conditions in the selected
CBDs over the past decade.
• Effective rent comparisons – the tenant effective rent section reveals the
actual rents tenants are paying and the landlord effective rent segment
uncovers how much of that amount landlords really get to keep.
• Suburban analysis – the SERI investigates year-to-year trends in nine
selected suburban office markets.
All statistics in this year’s SERI are based on transactions as of December 2002
in existing or newly constructed Class A buildings. The data is reflective of
full-floor, 10-year leases and is defined on a per rentable square foot, per
annum basis.
Tenant Effective RentsE
FF
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Tenant Effective RentComparisonIn the space of two short years, most
major U.S. markets went from near-
record tightness to near-record softness.
Reflecting this reality, tenant effective
rents continued to decline sharply in
many major markets in 2002. Only two
of our selected markets recorded
increases in tenant effective rents,
compared with four in the previous
year. San Francisco, which experienced
a 31.3% decrease in tenant effective
rents in 2001, saw an even bigger drop
in 2002, falling 45.8%. Other cities
which saw drops greater than 10% in
2002 included Atlanta, Boston, Houston,
West Los Angeles, Miami, and Midtown
Manhattan.
-50
-40
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-20
-10
0
10%
San Fr
ancis
co
Mid
tow
n NYC
Atlanta
Miam
i
Houston
Boston
Wes
t LA
Chicago
Downto
wn N
YC
Dallas
Denve
r
New Je
rsey
Phila
delphia
Downto
wn LA
Was
hingto
n, D.C
.
Tenant Effective Rent Comparison – Percentage Change 2002 vs. 2001
-9.7
%
5.7%
-1.2
%
-2.9
%
-7.5
%
-8.0
%
-9.5
%
-10.
7%
-11.
4%
-13.
6%
-16.
4%
-13.
0%
-45.
8%
-18.
2%
6.9%
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Tenant Effective Rent Comparison
The tenant effective rent is the total rent minus
lease concessions (amortized over a 10-year period,
using a 10 percent interest rate and beginning-of-
period payments). This comparison depicts the true
cost of occupying space for tenants – as opposed
to simply reporting average landlord asking rental
rates – in each of our selected CBDs.
SERI2003
$0 10 20 30 40 50 60 70
20012002
Atlanta
Dallas
Denver
Downtown LA
Houston
West LA
Chicago
Philadelphia
Miami
San Francisco
New Jersey
Downtown NYC
Boston
Washington, D.C.
Midtown NYC
Tenant Effective Rent Comparison 2002 vs. 2001
$53.72
$41.21
$40.45
$32.37
$30.64
$28.03
$26.58
$25.93
$25.83
$25.00
$24.39
$22.99
$22.73
$21.97
$21.05
EF
FE
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IVE
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Landlord Effective RentsE
FF
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Landlord Effective RentComparisonThe gap between asking and actual
rents widened further in 2002, creating
extremely attractive deals for tenants
when combined with the wide range of
concessions available. Building owners,
eager to maintain solid rent rolls, were
increasingly willing to offer enhanced
work letters, free rent, and flexible lease
terms. All of our selected markets
except for Washington, D.C. posted
decreases in landlord effective rents in
2002, compared with 11 out of 15
markets showing decreases in the
previous year. San Francisco had by far
the biggest decrease, with landlord
effective rents falling 65%. Other
markets with decreases in excess of 25%
included Atlanta, Chicago, Miami, and
Downtown and Midtown Manhattan.
-70
-60
-50
-40
-30
-20
-10
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10%
San Fr
ancis
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Chicago
Mid
tow
n NYC
Downto
wn N
YC
Atlanta
Miam
i
Houston
Boston
Wes
t LA
Dallas
Denve
r
New Je
rsey
Phila
delphia
Downto
wn LA
Was
hingto
n, D.C
.
Landlord Effective Rent Comparison – Percentage Change 2002 vs. 2001
-0.5
%
-18.
5%
-20.
2%
-26.
9%
-33.
8%
-32.
3%
4.6%
-4.9
%
-5.0
%
-11.
2%
-19.
6%
-21.
3%
-27.
8%
-65.
0%
-26.
0%5 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
Landlord Effective Rent Comparison
The landlord effective rent is calculated by taking
the total rent and subtracting operating expenses,
real estate taxes, tenant electricity, concessions, and
commissions. These numbers are derived without
consideration of landlords’ debt service obligation,
if any, since financing structures are complex and
involve far too many variables to be relevant.
SERI2003
$0 5 10 15 20 25 30 35 40 45
20012002
Chicago
Dallas
Atlanta
Downtown LA
Downtown NYC
Philadelphia
Miami
West LA
San Francisco
Houston
Denver
New Jersey
Boston
Washington, D.C.
Midtown NYC
Landlord Effective Rent Comparison 2002 vs. 2001
$28.36
$23.77
$22.29
$17.63
$15.72
$13.19
$13.03
$12.65
$12.22
$12.05
$11.85
$10.09
$10.02
$9.68
$6.47
EF
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IVE
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Rental TrendsR
EN
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AtlantaThe Atlanta commercial real estate market
weakened further in 2002 as local corporations
continued to retrench. Market indicators
approached levels not seen since the early 1990s.
The region’s overall availability rate topped 24%
at the end of 2002, with Class A availability rates
at just under 26%. Landlords increased concession
packages and became more flexible on a variety
of lease negotiation issues. Total rents in Atlanta
decreased 16.5% in 2002, or $4.88 per square foot,
to $24.75.
LandlordEffective
TenantEffective
TotalRentAtlanta Rental Trends
0
5
10
15
20
25
$30
2002200120001999199819971996199519941993199219911990
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LandlordEffective
TenantEffective
TotalRentBoston Rental Trends
0
10
20
30
40
50
60
$70
2002200120001999199819971996199519941993199219911990
BostonIn spite of an active investment environment,
all other factors favored tenants during 2002,
including falling rental rates, negative space
absorption, increasing concessions, and continued
increases in the sublease space inventory. Only the
institutional, medical, and biotech sectors provided
strength to the market. Total rents in Boston
decreased 8.5% in 2002, or $4.62 per square foot,
to $49.63.
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ChicagoBy the end of 2002, Chicago saw the growth of
underlying available space that has not been
counted by marketing or listing services. At least
3.4 million square feet located downtown was not
formally marketed or posted on listing services. This
situation was driven by tenants committing to move
to new construction, which will bring 2.5 million
square feet to the market. The Class A availability
rate in Chicago jumped to 17.0% at the end of
2002. Total rents in Chicago decreased 3.8% in
2002, or $1.44 per square foot, to $36.93.
LandlordEffective
TenantEffective
TotalRentChicago Rental Trends
-10
0
10
20
30
$40
2002200120001999199819971996199519941993199219911990
LandlordEffective
TenantEffective
TotalRentDallas Rental Trends
5
10
15
20
25
$30
2002200120001999
Dallas2002 was characterized by mounting levels of
available space in the Dallas/Fort Worth region.
The Dallas CBD posted a Class A availability rate of
19.6% at year-end. As a result, new construction
was held to a minimum. Although rents remained
relatively stable, concessions increased, with
landlords offering additional free rent and work.
Total rents in Dallas decreased 1.6% in 2002, or
$0.43 per square foot, to $25.67.
Rental TrendsR
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DenverLandlords continued to be aggressive in Denver in
2002, offering effective rents $2 to $4 per square
foot below asking rates. Concession packages
achieved levels not seen since the early 1990s as
landlords attempted to attract and retain tenants.
Despite these incentives demand remained weak,
resulting in increased availabilities and a further
decline in rents. Although the peak of the sublease
glut was reached in early 2002, six million square
feet of sublease space remained available at the
end of the year. Total rents in Denver decreased
6.0% in 2002, or $1.72 per square foot, to $26.84.
LandlordEffective
TenantEffective
TotalRentDenver Rental Trends
10
14
18
22
26
$30
2002200120001999
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LandlordEffective
TenantEffective
TotalRentHouston Rental Trends
0
5
10
15
20
25
30
$35
2002200120001999199819971996199519941993199219911990
HoustonOngoing negative economic news, along with
corporate restructuring and downsizing, drove
Houston market expectations to a new low in 2002.
The overall availability rate rose 1.1 percentage
points to just under 20% by year-end. The Class A
availability rate increased to 18.9%, which
represented a six-percentage-point increase from
a year earlier. Average asking rental rates in the
region continued their downward trend. Total rents
in Houston decreased 9.4% in 2002, or $2.91 per
square foot, to $28.09.
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Downtown LADowntown Los Angeles was one of the few markets
to record an increase in total rents in 2002, with
total rents increasing 4.4%, or $1.24 per square
foot, to $29.65. Tenants capitalized on the city’s
tenant-favored market for the second consecutive
year by renewing existing office space and
negotiating flexible long-term leases. More tenants
elected to renew and expand at their current
locations rather than relocate in 2002, and steady
activity pushed down the Class A availability rate
to 19.1% by year-end.
LandlordEffective
TenantEffective
TotalRentDowntown LA Rental Trends
-5
0
5
10
15
20
25
30
$35
2002200120001999199819971996199519941993199219911990
LandlordEffective
TenantEffective
TotalRentWest LA Rental Trends
0
5
10
15
20
25
30
35
$40
2002200120001999199819971996199519941993199219911990
West LASignificant Class A office space availabilities
continued to exist in West Los Angeles in 2002 as
companies strove to lower their occupancy costs
by terminating leases and reducing square footage.
There were more than eight million square feet of
available Class A office space in West Los Angeles
at year-end out of a total Class A inventory of 40
million square feet. Total rents in West Los Angeles
decreased 5.3% in 2002, or $1.80 per square foot,
to $32.40.
Rental TrendsR
EN
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EN
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MiamiAfter enduring declining market conditions for
most of 2002, Miami appeared to reach a state of
equilibrium by the end of the year. While there
were indications of market strengthening, landlords
were slow to adjust to their improved bargaining
position. Tenants took advantage of this by working
with landlords to structure innovative transactions.
The biggest change in 2002 was the extent of
concessions landlords were offering, with tenants
receiving up to a year of free rent. Total rents in
Miami decreased 6.5% in 2002, or $2.25 per square
foot, to $32.50.
LandlordEffective
TenantEffective
TotalRentMiami Rental Trends
10
15
20
25
30
35
$40
2002200120001999
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LandlordEffective
TenantEffective
TotalRentNew Jersey Rental Trends
0
5
10
15
20
25
30
35
$40
2002200120001999199819971996199519941993
New JerseyNew Jersey’s overall Class A availability rate
increased to 19.3% by the end of 2002. Overall
Class A rental rates fell significantly as building
owners continued to compete with numerous
sublease alternatives. The flood of sublease space
that swamped New Jersey in 2001 began to flatten
out in 2002. Just 1.5 million square feet of sublease
options were added in 2002, compared with the
4.9 million square feet added to the market in
2001. Total rents in New Jersey decreased 2.6%
in 2002, or $0.90 per square foot, to $33.60.
SERI2003
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Downtown NYCThe focus on Lower Manhattan by government
officials continued in 2002 as both the city and state
announced major initiatives in the rebuilding at
Ground Zero. The submarket clearly stabilized, and
2002 saw remarkable progress. Overall, however,
leasing activity was not enough to offset the
downsizing and relocation that occurred
throughout the year. Class A availability rates
jumped in 2002, increasing to 17.8% at the end
of the year. Total rents in Downtown Manhattan
decreased 2.9% in 2002, or $1.26 per square foot,
to $42.50.
LandlordEffective
TenantEffective
TotalRentDowntown NYC Rental Trends
0
10
20
30
40
50
$60
2002200120001999199819971996199519941993199219911990
LandlordEffective
TenantEffective
TotalRentMidtown NYC Rental Trends
0
10
20
30
40
50
60
70
$80
2002200120001999199819971996199519941993199219911990
Midtown NYCThe Midtown Manhattan office market saw
continued softening in 2002. Corporations and
many service firms, with the significant exception
of law firms, continued to shed space as the
economic downturn proved longer-lived than
expected. The increasing quantity of “shadow
space” expanded options for tenants and further
enhanced their leverage with building owners in
2002. Overall availability rates rose from 8.4% in
the first quarter to 10.2% in the fourth quarter,
an increase of over 20%. Accordingly, asking rents
decreased in every quarter. Total rents in Midtown
Manhattan decreased 14.1% in 2002, or $10.54 per
square foot, to $64.00.
Rental TrendsR
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EN
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PhiladelphiaThe Philadelphia region’s office market remained
static in the fourth quarter of 2002, with an overall
availability rate of 18.2%. The strong leasing
performance posted by some Philadelphia area
submarkets may be a harbinger for 2003. These
numbers reflected more deals being closed and
less sublease space coming to market. Although
the Philadelphia region experienced rising vacancies
and minimal leasing activity in 2002, investors
poured money into local properties. Total rents in
Philadelphia increased slightly in 2002 to $31.11.
LandlordEffective
TenantEffective
TotalRentPhiladelphia Rental Trends
0
5
10
15
20
25
30
$35
2002200120001999199819971996199519941993199219911990
1 3 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
LandlordEffective
TenantEffective
TotalRentSan Francisco Rental Trends
0
10
20
30
40
50
60
70
$80
2002200120001999199819971996199519941993199219911990
San FranciscoSan Francisco leasing activity rose in the latter part
of 2002, as tenants cashed in on low rents and
generous concession packages from landlords.
Asking rental rates posted their eighth consecutive
quarterly decline in the fourth quarter of the year.
Availability rates in 2002 remained at a level not
seen in more than three decades. After two years
of freefall, the San Francisco market stabilized at
about 80% occupancy in the second half of 2002.
Total rents in San Francisco decreased 38.8% in
2002, or $21.50 per square foot, to $33.95.
SERI2003
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Washington, D.C.In 2002, Washington, D.C. continued to boast the
nation’s healthiest office market, posting a 7%
availability rate at the end of the year. Major
leasing activity was dominated by D.C.’s core
tenants – the federal government and law firms.
Large users needing more than 150,000 square feet
faced unyielding rents for the scarce number of
well-located large blocks of space. Total rents in the
District increased 6.4% in 2002, or $2.95 per square
foot, to $49.35. However, with approximately two
million square feet expected to deliver in late 2003,
landlords may become more flexible with rental
rates and concessions in the coming year.
LandlordEffective
TenantEffective
TotalRentWashington, D.C. Rental Trends
0
10
20
30
40
$50
2002200120001999199819971996199519941993199219911990
Rental TrendsR
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EN
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National Rental TrendsOverview – 2002The following graphs compare total rents,
tenant effective rents and landlord
effective rents for all 15 of our selected
major metropolitan markets presented
in the same scale.
1 5 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
Atlanta
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Dallas
-100
10203040506070
$80
2002200120001999
Chicago
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Houston
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Boston
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Denver
-100
10203040506070
$80
2002200120001999
Total Rent
Tenant Effective
Landlord Effective
SERI2003
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Downtown LA
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
West LA
-100
10203040506070
$80
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Miami
-100
10203040506070
$80
2002200120001999
New Jersey
-100
10203040506070
$80
2002200120001999199819971996199519941993
Downtown NYC
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Midtown NYC
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Philadelphia
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
San Francisco
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Washington, D.C.
-100
10203040506070
$80
2002200120001999199819971996199519941993199219911990
Rental ComponentsR
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Components of Total Rent – 2002The SERI tracks the four components of total rent: net rent, operating
expenses, real estate taxes, and tenant electricity. The aggregate total rent for
each of our selected CBDs is reflected on the following page.
1 7 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
Components of Total Rent
The graph provides an overall picture of how much each of the rental components – net rent,
operating expenses, real estate taxes, and electricity – contributed to total rents in our 15 CBD
markets in 2002.
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$0 10 20 30 40 50 60 70
ElectricityR.E. TaxesOperating Expenses
Net Rent
Washington, D.C.
San Francisco
Philadelphia
Midtown NYC
Downtown NYC
New Jersey
Miami
West LA
Downtown LA
Houston
Denver
Dallas
Chicago
Boston
Atlanta
Components of Total Rent
$24.75
$49.63
$36.93
$25.67
$26.84
$28.09
$29.65
$32.40
$32.50
$33.60
$42.50
$64.00
$31.11
$33.95
$49.35
Rental ComponentsR
EN
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ON
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Total Rent ComparisonTotal rents in most major markets across
the U.S. experienced declines in 2002.
Only two of our selected markets
showed modest increases, Washington,
D.C. and Downtown Los Angeles. Three
markets experienced decreases in total
rent over 10% in 2002, with San
Francisco experiencing by far the
biggest drop, falling 38.8%.
1 9 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
Total Rent Comparison
The total rent comparison is the sum of the net
rent, operating expenses, real estate taxes, and
tenant electricity. The numbers presented contrast
2002 with the previous year.-40
-35
-30
-25
-20
-15
-10
-5
0
5
10%
Was
hingto
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.
San Fr
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Phila
delphia
Mid
tow
n NYC
Downto
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YC
New Je
rsey
Miam
i
Wes
t LA
Downto
wn LA
Houston
Denve
r
Dallas
Chicago
Boston
Atlanta
Total Rent Comparison – Percentage Change 2002 vs. 2001
-8.5
%
-9.4
%
-5.3
%
-2.9
%
-38.
8%
0.2%
-16.
5%
-3.8
%
-1.6
%
-6.0
%
4.4%
-6.5
%
-14.
1%
6.4%
-2.6
%
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$0 10 20 30 40 50 60 70 80
20012002
Washington, D.C.
San Francisco
Philadelphia
Midtown NYC
Downtown NYC
New Jersey
Miami
West LA
Downtown LA
Houston
Denver
Dallas
Chicago
Boston
Atlanta
Total Rent Comparison 2002 vs. 2001
$24.75
$49.63
$36.93
$25.67
$26.84
$28.09
$29.65
$32.40
$32.50
$33.60
$42.50
$64.00
$31.11
$33.95
$49.35
Rental ComponentsR
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Net Rent ComparisonNet rent equals the gross rental cost
exclusive of the tenant’s proportionate
share of real estate taxes, operating
expenses, and tenant electricity.
2 1 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
$0 10 20 30 40 50 60
20012002
Washington, D.C.
San Francisco
Philadelphia
Midtown NYC
Downtown NYC
New Jersey
Miami
West LA
Downtown LA
Houston
Denver
Dallas
Chicago
Boston
Atlanta
Net Rent Comparison 2002 vs. 2001
$15.25
$33.13
$19.00
$15.00
$18.78
$18.49
$18.00
$21.42
$20.00
$23.00
$23.78
$41.41
$19.00
$20.00
$33.85
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$0 1 2 3 4 5 6 7 8 9 10
20012002
Washington, D.C.
San Francisco
Philadelphia
Midtown NYC
Downtown NYC
New Jersey
Miami
West LA
Downtown LA
Houston
Denver
Dallas
Chicago
Boston
Atlanta
Operating Expense Comparison 2002 vs. 2001
$5.25
$8.87
$7.90
$6.08
$5.84
$4.65
$7.75
$6.40
$8.50
$6.05
$8.38
$8.40
$7.52
$9.00
$7.25
Operating ExpenseComparisonThese numbers include heating,
ventilation and air conditioning;
maintenance; common area utilities
and electricity; cleaning; and all other
non-capital costs associated with the
operation of a building.
Rental ComponentsR
EN
TAL
CO
MP
ON
EN
TS
Real Estate Tax ComparisonReal estate taxes are determined by
using basic local real estate taxes in
each of the 15 CBD markets, exclusive
of special assessments and other one-
time charges.
2 3 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
$0 2 4 6 8 10 12
20012002
Washington, D.C.
San Francisco
Philadelphia
Midtown NYC
Downtown NYC
New Jersey
Miami
West LA
Downtown LA
Houston
Denver
Dallas
Chicago
Boston
Atlanta
Real Estate Tax Comparison 2002 vs. 2001
$2.75
$6.38
$8.50
$2.99
$1.33
$3.50
$2.10
$2.73
$2.50
$3.05
$7.84
$11.69
$3.09
$3.15
$6.00
SERI2003
RE
NTA
L C
OM
PO
NE
NT
S
S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3 | 2 4
$0.0 0.5 1.0 1.5 2.0 2.5
20012002
Washington, D.C.
San Francisco
Philadelphia
Midtown NYC
Downtown NYC
New Jersey
Miami
West LA
Downtown LA
Houston
Denver
Dallas
Chicago
Boston
Atlanta
Tenant Electricity Comparison 2002 vs. 2001
$1.50
$1.25
$1.53
$1.60
$0.89
$1.45
$1.80
$1.85
$1.50
$1.50
$2.50
$2.50
$1.50
$1.80
$2.25
Tenant ElectricityComparisonTenant electricity consists of the
payment made by the tenant, whether
to the landlord or public utility, or by
the landlord, as a general building
expense, for the electrical power
consumed within the tenant’s premises,
exclusive of building HVAC.
Suburban AnalysisS
UB
UR
BA
N A
NA
LYS
IS
Suburban Tenant and LandlordEffective Rent ComparisonThe following graphs analyze tenant
effective rents and landlord effective rents
for the following suburban office markets:
Suburban Chicago (Cook County and
Lake/DuPage Counties, Ill.); Fort Lauderdale,
Fla.; metropolitan New York (Fairfield
County, Conn., and Long Island and
Westchester County, N.Y.); Orange County,
Calif.; Suburban Washington, D.C.
(Northern Virginia); and Silicon Valley, Calif.
Suburban Tenant Percentage Change
-70
-60
-50
-40
-30
-20
-10
0
10%
Norther
n VA
Wes
tches
ter C
ounty, N
Y
Long Is
land, N
Y
Lake
/ DuPa
ge Countie
s, IL
Cook County
, IL
Ft. L
auder
dale, F
L
Fairf
ield C
ounty, C
T
Silico
n Vall
ey, C
A
Orange C
ounty, C
A-1
5.4%
-60.
4%
-8.1
%
-17.
3%
0.4%
-9.3
%
-4.9
%
-17.
3%
-15.
0%
2 5 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
Suburban Landlord Percentage Change
-80
-70
-60
-50
-40
-30
-20
-10
0%
Norther
n VA
Wes
tches
ter C
ounty, N
Y
Long Is
land, N
Y
Lake
/ DuPa
ge Countie
s, IL
Cook County
, IL
Ft. L
auder
dale, F
L
Fairf
ield C
ounty, C
T
Silico
n Vall
ey, C
A
Orange C
ounty, C
A-2
6.3%
-74.
4%
-27.
3%
-15.
0%
-10.
6%
-24.
1%
-8.7
%
-35.
9%
-21.
9%
SERI2003
Suburban Tenant Effective 2002 2001
$0 10 20 30 40 50 60
Northern VA
Westchester County, NY
Long Island, NY
Lake / DuPage Counties, IL
Cook County, IL
Ft. Lauderdale, FL
Fairfield County, CT
Silicon Valley, CA
Orange County, CA$22.63
$23.62
$31.19
$21.04
$21.06
$16.41
$28.60
$24.30
$21.30
SU
BU
RB
AN
AN
ALY
SIS
S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3 | 2 6
2002 2001Suburban Landlord Effective
$0 10 20 30 40 50
Northern VA
Westchester County, NY
Long Island, NY
Lake / DuPage Counties, IL
Cook County, IL
Ft. Lauderdale, FL
Fairfield County, CT
Silicon Valley, CA
Orange County, CA$11.71
$12.50
$16.84
$10.91
$6.60
$5.53
$12.62
$8.81
$11.33
Statistical SummaryS
TAT
IST
ICA
L S
UM
MA
RY
This summary depicts a two-year comparison of all rental components – net
rent, operating expenses, real estate taxes, and electricity costs – as well as
tenant concession packages. Taken together, these figures enable us to
calculate Tenant Effective Rents and Landlord Effective Rents for our 15
selected CBDs.
Sublease alternatives comprised an increasingly significant portion of
available space in 2002, much of which will convert to direct space during the
next several years. In addition, brokers reported significant quantities of
“shadow space.” Shadow space is sublease space that could be made available
under the right terms but which is not formally on the market. It is difficult to
gauge the impact of shadow space, but its presence further increased tenants’
leverage in lease negotiations, putting additional downward pressure on
effective rents.
The continuing series of shocks endured by the economy in 2002 created a
tendency toward risk-aversion among corporate leaders, slowing a nascent
recovery. Recession, terrorism, corporate fraud, and the prospect of war were
enough to make businesses question major capital investments and expansion
plans. However, optimism may grow if the national economy recovers as
anticipated in 2003.
2 7 | S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3
SERI2003
STA
TIS
TIC
AL
SU
MM
AR
Y
S T U D L E Y E F F E C T I V E R E N T A L I N D E X 2 0 0 3 | 2 8
Atlanta
Boston
Chicago
Dallas
Denver
Houston
Downtown LA
West LA
Miami
New Jersey
Downtown NYC
Midtown NYC
Philadelphia
San Francisco
Washington, D.C.
Net Operating R.E. Total Concession Landlord Tenant
Year Rent Expenses Taxes Electricity Rent Packages Effective Effective
2002 $15.25 $5.25 $2.75 $1.50 $24.75 $25.00 $10.02 $21.05
2001 20.00 5.38 2.75 1.50 29.63 30.00 13.70 25.19
2002 33.13 8.87 6.38 1.25 49.63 62.00 22.29 40.45
2001 38.34 8.44 6.21 1.25 54.25 58.00 27.93 45.67
2002 19.00 7.90 8.50 1.53 36.93 75.00 6.47 25.83
2001 21.00 7.35 8.49 1.53 38.37 66.00 9.78 28.61
2002 15.00 6.08 2.99 1.60 25.67 25.00 9.68 21.97
2001 15.75 5.85 2.90 1.60 26.10 15.00 11.88 23.88
2002 18.78 5.84 1.33 0.89 26.84 27.75 15.72 22.73
2001 20.66 5.67 1.37 0.86 28.56 27.00 17.72 24.57
2002 18.49 4.65 3.50 1.45 28.09 25.00 13.19 24.39
2001 21.50 4.50 3.50 1.50 31.00 20.00 16.77 28.04
2002 18.00 7.75 2.10 1.80 29.65 45.00 10.09 22.99
2001 18.00 6.78 1.98 1.65 28.41 45.00 10.14 21.75
2002 21.42 6.40 2.73 1.85 32.40 50.00 12.65 25.00
2001 23.40 6.42 2.68 1.70 34.20 42.00 15.72 27.99
2002 20.00 8.50 2.50 1.50 32.50 40.00 12.22 26.58
2001 22.50 8.25 2.50 1.50 34.75 27.00 16.51 30.76
2002 23.00 6.05 3.05 1.50 33.60 20.00 17.63 30.64
2001 24.00 6.00 3.00 1.50 34.50 20.00 18.57 31.54
2002 23.78 8.38 7.84 2.50 42.50 68.50 11.85 32.37
2001 26.25 8.13 6.88 2.50 43.76 54.00 16.40 35.77
2002 41.41 8.40 11.69 2.50 64.00 69.50 28.36 53.72
2001 54.00 8.13 9.91 2.50 74.54 60.00 41.88 65.66
2002 19.00 7.52 3.09 1.50 31.11 35.00 12.05 25.93
2001 19.25 7.30 3.00 1.50 31.05 32.50 12.67 26.24
2002 20.00 9.00 3.15 1.80 33.95 40.00 13.03 28.03
2001 42.00 8.50 3.15 1.80 55.45 25.00 37.25 51.75
2002 33.85 7.25 6.00 2.25 49.35 55.00 23.77 41.21
2001 32.40 6.50 5.50 2.00 46.40 53.00 22.73 38.56
Atlanta
3390 Peachtree Road N.E., Suite 850Atlanta, GA 30326 (404) 467-0707
Chicago
One E. Wacker Drive, Suite 3900 Chicago, IL 60601(312) 595-2900
Dallas
13727 Noel Road, Suite 1000 Dallas, TX 75240(972) 739-2200
Denver
1050 17th St., Suite 1050 Denver, CO 80265(303) 302-5100
South Florida
200 E. Broward Blvd., Suite 1200 Fort Lauderdale, FL 33301 (954) 343-1600
Houston
24 Greenway Plaza, Suite 1105 Houston, TX 77046 (713) 522-5300
Downtown Los Angeles
777 S. Figueroa St., 25th Floor Los Angeles, CA 90017 (213) 553-3800
Los Angeles
10960 Wilshire Blvd., Suite 1700 Los Angeles, CA 90024 (310) 444-1000
New Jersey
333 Thornall St., 1st Floor Edison, NJ 08837(732) 906-1001
New York
300 Park Ave. New York, NY 10022(212) 326-1000
Philadelphia
1 Liberty Place1650 Market St., Suite 1525Philadelphia, PA 19103(215) 563-4000
Orange County
2 Park Plaza, Suite 1075Irvine, CA 92614(949) 660-3555
San Francisco
505 Montgomery St., Suite 1200 San Francisco, CA 94111(415) 421-5900
Suburban Washington, D.C.
8180 Greensboro Drive McLean, VA 22102(703) 442-9000
Washington, D.C.
555 13th St. N.W., Suite 420E Washington, D.C. 20004(202) 628-6000
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www.globalpropertyalliance.com
Julien J. Studley, Inc.Corporate Headquarters
300 Park Ave.New York, NY 10022(212) 326-1000
Entire contents copyright © 2003 Julien J. Studley, Inc.