Landlords are regaining control of the U.S. office sector, due to an improving job market, sustained technology boom and a limited supply of premium office space. With just about every major city and many secondary markets experiencing rent growth, 2016 is setting up to be a strong year for the U.S. economy, commercial real estate as a whole, and especially premium office space.
Office rents in the major U.S. markets now average $28.37 per square foot, and St. Louis Class A rents come in at an average value of $21.72 per square foot – price points that rival those rent levels seen prior to the recession. What’s more, during the fourth quarter of 2015, St. Louis’ Class A property saw over 280,000 square feet of positive absorption. Roughly 3.5 million square feet of space remains vacant in the area, and no speculative construction announced.
For those who want to add quality office space to their commercial real estate portfolio, the opportunities may be harder to come by. However, the right addition could yield remarkable results. Dropping unemployment rates and tightening talent pools are forcing companies to consider office upgrades. That, in turn, means appealing office space will be easier to lease, and businesses will be willing to pay for it.
The best way to position your commercial office property for success is to ensure a premium appearance. CoStar Group, a leading provider of commercial real estate information and analytics, reports that quality renovations can result in significant rent gains, offering an average occupancy boost of 10 percent and a revenue gain of as much as 30 percent.
Real estate investors looking to capitalize on the tight office market may also choose to develop space to entice renters. Moving quickly – and in the right area – may allow for significant revenue growth in today’s market.
For insight into the best ways to develop, improve or price commercial office space, contact the professionals at Intelica Real Estate. We can help you make the most of the market and your portfolio.