When JLL reported last month the San Francisco office market had seen its first positive net absorption quarter in four years, the news was enough to make headlines. But the City by the Bay was not the only one with glad tidings.
The U.S. office market continued to make strides forward in Q3 2024, ringing up 4.9 million square feet of positive net absorption. That came on heels of Q2’s 1 million square foot positive net absorption.
In its Q4 2024 U.S. Office Outlook Report, released January 7, JLL revealed U.S. office recovery reached a post-pandemic high in 2024’s final three months.
The win was driven by more stringent office attendance mandates and a slowing of downsizing rates. Fourth-quarter leasing volume reflected a 17.6% increase year over year, and 4.9% growth quarter over quarter. Q4 volume surpassed 92% of pre-pandemic averages.
The report also found tenants flocking to highly-amenitized properties. What JLL called “an intense flight to quality” resulted in only 11.4% of buildings witnessing an increase in vacancy rates. That’s the lowest share of the market in the past decade, the firm noted. “Many of the downsizing leases executed throughout the pandemic have also upgraded to newer and more amenitized buildings, leaving large chunks of vacancy in older assets or even vacating entire buildings in some instances,” the report’s authors wrote.
Let’s now examine a couple notable examples of such amenitized office buildings.
Fresh ideas
Helping turn the tide have been newly delivered office projects with fresh ideas in how to attract tenants. One of the most notable: The new One Santana West office building within the 2 million-square-foot Santana Row mixed use development in Silicon Valley. Another is Perimeter Summit, a renovated 1.7-million-square-foot, Class A mixed-use development in Brookhaven, Ga., a near northeastern suburb of Atlanta.
Both office developments have profited from luring household name tenants. At One Santana West, PWC’s regional office inked a lease. Acrisure did the same for its Western Region headquarters, as did AI startup Couchbase. At Perimeter Summit, the trophy tenant was American International Group, Inc. (AIG), which opened its 180,000-square-foot digital innovation hub in the complex. “We are thrilled to welcome AIG to Summit Two,” says Laura Dunn, managing director for office property owner-operator Spear Street Capital. “AIG joining the campus is a testament to the trend we are seeing nationally – highly differentiated assets with market-leading amenities will continue to attract best-in-class occupiers.”
Spec suites
One Santana West leveraged the use of spec office suites to demonstrate precisely how the space might be built out by prospective office tenants.
In much the same way model homes inspire interest, the speculative built-out second-floor offices, meeting areas, collaboration nooks and kitchens/gathering areas helped prospects visualize what a One Santana West office occupier might experience upon settling in.
One Santana West also added coveted amenities. The development pre-built its luxuriant landscaping and outdoor plazas, then incorporated an indoor golf simulator, fitness center and café as tenant amenities. A pair of pickleball courts were added in the parking lot, allowing those inclined toward paddle battles the competition they crave.
Permeter Summit offers tenants direct connections to the Medical Center MARTA station, as well as I-285 and GA-400. Freshened lobbies, updated spec suites, new pickleball courts and improved outdoor workspaces are among the amenities served up at the renovated campus. Mindful of the importance of tenant engagement, ownership regularly delivers vibrant community programs, among them live music, outdoor movie nights, Kentucky Derby and Cinco de Mayo parties, happy hours and other activation.
Turning to this year, the authors noted most markets continue to be undersupplied with high-quality workspaces. In some markets, that may dent transaction activity in the months ahead. They concluded: “In 2025, this lack of supply will cause a dependency on improved capital flows to alleviate some of the pressures in the market
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