Space matters. It’s one of the core tenets of the commercial real estate industry.
As companies face continued competition, corporate real estate is one their best tools to attract and retain top talent.
But what goes into the space companies want has also shifted over the years.
Some of the most significant changes to the occupier workplace in recent years have revolved around workplace density, amenities, parking, and landlord concessions.
Since the Great Recession, many companies have shifted to a more open office design, allowing for more collaboration as well as less square footage per employee.
On a national basis, the average density has dropped from 211.4 to 193.8 square feet per employee since 2009 – an 8.3 percent drop.
In the Boston commercial real estate market, those changes have been relatively muted, with just a 3.6 percent reduction in per employee space and an average of 184 square feet per employee. However, occupiers in Atlanta and San Francisco have seen reductions north of 21% in just an eight-year period.
While the rate of change has slowed during the past few years, the trend of denser offices is likely to be nudged further along in the near future. New lease accounting rules will require public companies to include lease obligations on their balance sheets – a liability they will likely look to minimize.
Another aspect of the office environment which has undergone a realignment during the past several years is the concept of amenities – particularly with the Millennial generation now representing the largest sector of the workforce.
Tenant and landlord priorities for those amenities are varied. However, the options which received the most responses as the most important amenity were parking (24%), fast-casual food options (24%), conference facilities (12%), and fitness centers (12%).
In addition, while no respondents in Cushman & Wakefield’s survey listed outdoor spaces or tenant common areas as their No. 1 option, when respondents listed their Top 5 choices, they pulled 53 and 44 percent, respectively. Fitness centers were the most common response, ranking in the Top 5 of 77 percent of responses.
The idea that parking in the Boston area can be a challenge is about as big of an understatement as saying Tom Brady is a popular quarterback.
Among the markets included in the survey (New York City data not available), Boston had the most expensive parking in the country (at $520 per space), as well as the tightest allocation (at 0.5 parking spots per 1,000 square feet of office space).
At a national level, it’s a situation focused primarily on the Northeast, where spots averaged $357 and there was an allocation 2.2 per 1,000 square feet of space. No other region had a per-price spot of more than $165.
2017 was a strong for the Boston office market, with rents increasing 7.9 percent in 2017.
At the same time, concessions increased even steeper, jumping more than 19 percent compared to 2016 – an increase that ranked 2nd in the country behind only San Francisco among the largest cities in the U.S.
Overall, TI in Class A buildings in Boston increased to $63 per square foot, with free rent equal to roughly 2.7 months. Properties located within the CBD averaged $68 per square foot in TI, while suburban TIs averaged $48 per square foot. Looking ahead, tenant improvement allowances are projected to increase further, with free rent remaining stable.