On the Rise: Rental Prices and Property Values

April 20, 2015

Developers and investors involved with commercial office space have a few reasons to smile this spring, as a pair of recently released reports bring good news to urban commercial markets: Not only have property values increased for office space nationwide, but rental prices are also on the rise.

Research from real estate research firm Green Street Advisors found that property values for the end of the first quarter were up 11 percent over last year, and 14 percent over the prior market peak in 2007. In all, values have risen 87 percent since bottoming out in 2009.

In addition, international news agency Reuters reports that a boom in business hiring — especially among tech, advertising, media and information companies — is supporting a rise in office space demand and a corresponding jump in rental prices. Reuters states that costs are up 3.1 percent so far this year, which represents the highest quarterly gain in a decade.

Beyond the initial uptick in value and demand, increased leasing activity and rental prices is likely to create a tighter market for commercial real estate. This, in turn, will give landlords reason to increase prices over the year to come. Plus, with the current low-interest environment, it’s likely that there will be further property appreciation within the commercial market.

It’s a cycle that bodes well for wise investors and landlords, but those who keep the infrastructure needs of modern business in mind will stand to capitalize the most. The reports show that areas catering heavily toward technology tenants are showing lower vacancy rates and higher market rental rates overall.

The commercial real estate professionals at Intelica can help you determine the best opportunities for commercial office development and assist in evaluating your leasing standards to ensure fair market pricing. Contact our Office Services Group today to learn more.