jll’s mid-year skyline update: a closer look at oh, mi & pa
TRANSCRIPT
What’s the beat of the Skyline?2016 overview and trends
June 2016
Skyline at a Glance
The Skyline set continues to demonstrate success…. From a fundamentals perspective, the top-tier office set posts significantly lower vacancy, higher rents and more developer interest in relative terms than the overall market.
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The top of the market continues to outperform, but faces competition from emerging segments.
Trophy U/C
Trophy
Skyline
CBD
Overall
Average asking rent ($ p.s.f.)$20 $33 $45 $58 $70
$32.28
$43.42
$43.79
$56.82
$61.82
Skyline at a Glance
JLL’s Skyline focuses on the top tier of the office market, looking at some of the most iconic and highest-rent properties within CBDs and urban cores.
3
The top of the market continues to outperform, but faces competition from emerging segments.
RBA
(s.f.
)
400,000,000
475,000,000
550,000,000
625,000,000
700,000,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
RBA (s.f.) Numer of buildings
50.6% Trophy share
of supply
Trophy Non-trophy
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1.Gone today, here tomorrow Many markets are expecting to see substantial office building deliveries, which will begin to shift the balance from landlord-favorable conditions and ease the leasing environment for tenants.
WHAT ARE THE TRENDS IN 2016?
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2.More, more, more Premium pricing for coveted Skyline buildings will be exacerbated as new Trophy buildings are delivered, forcing some tenants to look to lower cost options or different markets altogether.
WHAT ARE THE TRENDS IN 2016?
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3.Ready, steady, go The global economy combined with the concern over the growth trajectory of the technology industry, continues to weigh on the minds of investors.
WHAT ARE THE TRENDS IN 2016?
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4.On the road Cost and competition in primary markets mean Skyline assets are harder to acquire, if at all. Investors are looking to hot secondary markets where rent growth is still achievable and tenant demand persists.
WHAT ARE THE TRENDS IN 2016?
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5.What have you done for me lately? Despite the rise in popularity of older creative buildings and fringe markets, Skyline assets still have lasting power, but only if owners meet the needs of tenants to remain competitive.
WHAT ARE THE TRENDS IN 2016?
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Introducing the Great Lakes Skyline
MI, OH & PA
Cleveland at a Glance
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Corporate rightsizings over the last five years have increased Skyline vacancy to 21%, and as a result, tenants have enjoyed negotiating leverage. Conditions in the Skyline will begin to tighten though, as residential conversions and mounting demand for downtown offices will have a compounding effect on vacancy.
Visit the Cleveland Skyline.
Source: JLL Research
Cleveland at a Glance
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Tenants do hold negotiating leverage in 2016, but conditions will begin to tighten.
Source: JLL Research
Columbus at a Glance
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Central Ohio’s economic outlook is bright, and as a result, market fundamentals are strengthening. Tenants are looking for office space in urban areas to keep up with millennial preferences and the influx of new job opportunities available. Technology and creative firms have also flocked to downtown Columbus, as seen in leases signed by CoverMyMeds and Aver over the course of 2015.
Visit the Columbus Skyline.
Source: JLL Research
Columbus at a Glance
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As the Skyline tightens, demand remains concentrated on Class A space, where limited availability has encouraged landlords to increase rental rates.
Source: JLL Research
Cincinnati at a Glance
14
The Cincinnati Skyline continues to see vacancy rates decrease and rental rates increase as demand for downtown office space grows. The heightened demand has allowed landlords to negotiate free rent and tenant improvement packages more aggressively as vacant space in the Skyline is being absorbed at the fastest rate since the Great Recession.
Visit the Cincinnati Skyline.
Source: JLL Research
Cincinnati at a Glance
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While vacancy rates decline, the demand for downtown office space is on the upswing in Cincinnati’s Skyline. The heightened demand has allowed landlords to play hardball with free rent opportunities and tenant improvement packages, as vacant space in the Skyline absorbs at the fastest rate since the recession.
Source: JLL Research
Detroit at a Glance
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The Detroit Skyline continues to attract demand from corporate clients looking to 2016 relocate from the suburbs to the CBD. New construction for office product has yet to take place; therefore, there has been no additional inventory to the Skyline.
Visit the Detroit Skyline.
Source: JLL Research
Detroit at a Glance
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Since 2010, net absorption has topped 1.7 million square feet, reducing vacancy from 26.0 percent to 8.8 percent at the start of 2016.
Source: JLL Research
Pittsburgh at a Glance
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While the Pittsburgh Skyline continues to perform exceptionally, tenants also have reason to be optimistic. Pittsburgh’s diversified economy remains in growth mode and additional options for space have begun to present themselves.
Visit the Pittsburgh Skyline.
Source: JLL Research
Pittsburgh at a Glance
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From an investment perspective, the Pittsburgh Skyline is exceeding expectations. Direct vacancy remains in the single digits and asking rates have averaged annual gains above 3.0 percent the last several years. All the while, landlords have continued to hold negotiating leverage.
Source: JLL Research
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016
Contact us.
Julia Georgules Director – Office Research +1 415 354 6908 [email protected]
Phil Ryan Senior Research Analyst – Office and Economy Research +1 202 719 6295 [email protected]
Visit the Skyline!
What else is on the horizon?