New Demand Will Eventually Take Large Block Space
With more than 1 million square feet of leasing demand projected across the Trophy and Class A market over the next 12 months, quality large block options will begin to decline, JLL predicts.
WASHINGTON, DC–It is no secret there is a glut of large block trophy and Class A space on the market right now thanks to a combination of multiple new deliveries and a tenant flight to quality at second-generation buildings. But a recent JLL report predicts that demand will eventually take some of the space now available.
Currently among Trophy and Class A buildings with an available block greater than 50,000 square feet, 4.1 million square feet of new space is available and 3.7 million square feet of second-generation space is available. “With 7.8 million square feet of availability at buildings with significant exposure, leverage remains strongly in tenants’ favor,” report author Carl Caputo writes.
JLL predicts that next year new developments are positioned to capture 75% of Trophy and Class A leases that are greater than 15,000 square feet. With new demand largely stemming from growing flexible office providers and continued migration to quality by law firms, consulting firms and financial firms, total availability among new buildings with available blocks that are greater than 50,000 square feet will decline by 20%.
Caputo concludes that:
While new demand will prevent the rise in Trophy and Class A vacancy to 20%, as new product continues to deliver, Trophy and Class A vacancy in the core will still increase from 14% to beyond 16% in the near-term, which will continue to suppress net effective rent growth.
