WASHINGTON, DC–A new research note from JLL concludes that lack of creative space for tech firms may lead to new supply even as the trophy and class A Downtown market is already at risk for oversupply.
Job growth in the tech sector in the Washington DC area will be the driver behind this development, according to stats by JLL Research Analyst Leah Smith. Over the past five years, the number of tech jobs in Washington, DC has increased by more than 20%, in comparison to a 0.1% decrease from 2007 to 2012. “As a share of total office jobs, tech jobs now comprise 10% of the employment base,” she writes in the note.
Because talent acquisition is one of tech companies greatest challenges, the workplace preferences of tech tenants are shifting to focus on what they want: which is namely environments that foster collaboration within the office. According to Smith:
The ability for tenants to create and utilize highly functional, new quality amenities within a space and throughout a building has led to the success of renovations such as 1620 L and Terrell Place.
She also pointed out that over the past four quarters, 16.6% of space leased by tenants greater than 20,000 square feet was within creative product.
Those respective facts add up to new development especially when you consider that less than 10% of buildings with a contiguous available block of greater than 20,000 square feet are creative. Smith's conclusion:
As a result, as leasing activity continues to flow to quality creative product and availabilities dwindle, developers will look to build new, ground-up product with unique designs and creative elements, which will appeal to an increasingly growing segment of the tenant base, but also push the ceiling on new construction rents.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
