The 2015 U.S. JLL Skyline review highlights multiple major markets across the US and Canada that are seeing a rise in the number of clients looking for Class B space. While these clients are mostly start-up, TAMI tenants, in several markets, start-ups from other industries have looked closely at the Class B space available to them as well.
Why are we seeing this trend?
Several factors, as our Atlanta research team points out on the JLL Investor blog, contribute to this trend in their market and others.
“As Atlanta’s office market continues to heat up, tenants in the market are finding fewer Class A options and the available options are 20 to 30 percent more expensive than they were just 24 months ago, factoring in rental rate increases and concession decreases. Accordingly, JLL expects that the Class B recovery, which has been lethargic over the past two years (only 578,000 square feet of Class B city-wide net absorption versus 3.84 million square feet of Class A), will have a robust – if not record – 24 months ahead.”
Not to mention the repositioning and renovation of Class B space to make it more attractive to tenants in the market.
How does this apply to New York?
New York has the largest inventory of Trophy and Class A space in the nation, but burgeoning Brooklyn is attracting more and more tenants each year. Brooklyn has historically been home to a blue collar labor force and warehouse inventory, but not anymore. As highlighted in JLL New York’s “Next Stop, Brooklyn” report, a key driver of increased interest in Brooklyn is the ongoing demographic shift in the borough, with incomes and rents rivaling, and in some cases topping, that of neighboring Manhattan. Brooklyn offers large open spaces sought by TAMI tenants at an annual savings of “$15 to $20 per square foot and bring(s) the cost of occupancy down to a fraction of that of Midtown South…” Highlights from the report include:
- The broader Brooklyn market represents more than 45 million square feet, of which 33 million square feet is concentrated in six primary commercial submarkets
- Institutions have purchased office and flex properties totaling nearly $650 million in Brooklyn since 2012
- Housing units in northern Brooklyn have grown nearly 20 percent since 2000
The report, which is available to download on our JLL New York site, expands upon these points and takes a deeper look at the value Brooklyn offers to investors and space options available to tenants.
Visit JLL Skyline Report for more information on the New York trophy market.