Upscale Tenant Amenities Drive Premium Rents for U.S. Office Buildings in 2024

In the dynamic landscape of the U.S. office market, a recent report by global property consultant JLL highlights the enduring appeal of highly amenitized office buildings, which continue to command premium rents amidst evolving tenant preferences. As demand for differentiated and high-quality office spaces surged during the pandemic, buildings offering enhanced amenities, such as gathering spaces and wellness facilities, have emerged as frontrunners in outperforming the broader market.

According to JLL, the resilience of highly amenitized buildings, characterized by 10 or more tagged amenities and distinctive offerings like roof terraces or full-service fitness centers, stands in stark contrast to the downturn observed in the overall urban Class ‘A’ product sector. While the latter experienced a significant loss of over 50 million square feet of occupancy, highly amenitized buildings collectively gained 23.3 million square feet of net absorption since the onset of the pandemic.

Drivers of Rent Premiums:

JLL’s analysis underscores the pivotal role of differentiation and quality in driving rent premiums associated with amenitization. While buildings equipped solely with fitness centers yield a modest 0.5% rent premium compared to peer assets, those offering comprehensive fitness amenities, including locker rooms and shower facilities, command rent premiums over five times larger than the baseline.

Similarly, the presence of food service or restaurant facilities within a building yields marginal rent premiums of 0.1% against peer assets. However, buildings featuring enhanced offerings such as food halls experience a noteworthy 1.4% rental premium compared to peers.

Outdoor Gathering Spaces:

Among the various amenities analyzed, enhanced outdoor gathering spaces emerge as key drivers of rent premiums. Outdoor roof terraces and courtyards equipped with seating areas are particularly influential in generating significant rent premiums against peer assets, according to JLL’s findings.

Implications for the Market:

The report underscores the evolving dynamics of tenant preferences and the growing significance of amenities in shaping leasing decisions within the office market. With an increasing emphasis on wellness, collaboration, and lifestyle experiences, tenants are prioritizing buildings that offer a comprehensive suite of amenities tailored to their evolving needs.

In conclusion, highly amenitized office buildings continue to enjoy premium rents and sustained demand from tenants seeking differentiated and quality-driven spaces. As the market evolves, landlords and developers are poised to capitalize on this trend by investing in amenities that enhance tenant experience and contribute to the overall attractiveness of their properties. With amenities playing a pivotal role in tenant retention and leasing activity, the emphasis on differentiation and quality is expected to remain a key driver of success in the competitive office market landscape.

Kiri Blakeley
Kiri Blakeley
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