How Office Features Stack Up in Getting Tenants To Pay More
Posted By: CoStar on March 24, 2024. For more information, please click here to read the source article.
Office tenants across the country have been shedding large amounts of real estate for the past several years, but some building features can not only convince tenants to keep leasing the space, but get them to pay a premium for it.
Roof terraces, sky lounges and outdoor courtyards with plenty of seating options, as well as fully outfitted fitness centers, are sparking more deals and driving rent growth, according to a report from real estate firm JLL. Properties with these types of features have collectively leased about 23.5 million more square feet than was vacated since the onset of the pandemic in early 2020. Meanwhile, other urban, top-tier properties have lost upward of 50 million square feet.
Most of the strongest rent premiums are associated with some form of outdoor space, according to JLL, and properties that include them generated the largest increases in rental rates compared to other higher-end buildings that tout a different package of amenities. Buildings with a gym, for example, showed only a 0.5% rent premium compared to other similar properties, while those with a fitness center stocked with features such as locker rooms, showers and other convenient perks generated a premium more than five times larger.
To be clear, upgrading a building to include one or more popular attributes probably won’t be enough to boost occupancy levels or drive meaningful rent growth, according to CoStar analysis. Other factors such as location, proximity to public transportation or a building’s age also come into play, and what’s more, the pool of tenants looking to shed space is still larger than the one looking to expand.
That has pushed the national office vacancy rate to a record high of nearly 14%, CoStar data shows, and new leasing activity has fallen to about 15% below the levels reported in 2019.
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