Melvin: Breaking Down Jones Lang LaSalle’s Outlook

November 7, 2019 | Insights, Investments, News, Real Estate

A breakdown of on the United States markets from the real estate giant.

Jones Lang LaSalle released its third-quarter U.S. Office outlook recently.

The global commercial real estate firm found that conditions are generally good. High-growth tech, creative and life sciences tenants are driving occupancy increases. Nationally vacancy rates are just 14%. A slowdown in completions means that high-end supply is quickly being absorbed. Smaller tenants may find high-end options limited as larger companies are taking advantage of their size and scale to lock up space in buildings scheduled to be completed in 2022 and 2023.

Jones Lang LaSalle Report

The report noted that leasing activity has moderated somewhat.

The firm noted, “The U.S. office market posted 26.7 million square feet of leasing activity during the third quarter larger than 20,000 square feet, below the 30-34 m.s.f. typically recorded on a quarterly basis. Shaping this transition was not only the general lull in activity during the third quarter of the year but also increasing challenges in finding skilled talent in primary and secondary markets alike as well as fluctuations in monthly job creation.”

Observations on the Outlook

I have commented that JLL found that “ Secondary markets were the biggest winners in terms of groundbreakings this quarter with an emphasis on new headquarters development: Norfolk Southern (Atlanta), Royal Caribbean (Miami) and Parsley Energy (Austin) and started on a combined 1.4 million square feet of new headquarters space in Q3.” d

There is a small but growing trend towards secondary markets as premium markets are becoming expensive and overly crowded.

On the firms “Office Clock” New York, Chicago, and Washington DC were in the falling phase. Other large cities like San Francisco, Los Angles and Seattle were all in the peaking phase of the CRE cycle. Kansas City, Indianapolis, Jacksonville, Grand Rapids, and Houston were all secondary cities that are in the rising phase and may be attractive to developers and investors right now.

You can download a copy of the full report here.

By: Tim Melvin

Related: Blackstone to Purchase Dream Global REIT for $4.7 Billion

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