Vacancy at the top of the market is slowly moving upward, although levels remain below historic norms. New supply and givebacks upon relocation due to efficiency have begun to and will continue to result in rising vacancy.
2. Global city office markets are preparing to enter a new
phase characterized by greater leverage for firms
Source: JLL Research 2
Tight conditions to ease
Vacancy at the top of the market is slowly
moving upward, although levels remain
below historic norms. New supply and give-
backs upon relocation due to efficiency
have begun to and will continue to result in
rising vacancy.
Rent growth beginning to slow
Rapid rent growth has challenged firms,
particularly in Sydney and San Francisco.
Changing supply-and-demand dynamics
will result in rents stabilizing in 2018 and
even dropping in supply-heavy markets
such as London, New York, Chicago and
DC.
Concessions trending upward
Landlords in top legal services markets
have increased tenant improvement
allowances by 34%. Concessions will rise
even more as new space delivers.
4. Brexit-related business slowdown and supply influx are
placing London counter to continental markets
Source: JLL Research 4
London (City)
4.3 m.s.f. will deliver beginning in 2018, while prime rents have
stalled at £70 p.s.f. Core City assets are more susceptible to rent
declines than those in fringe submarkets, benefitting firms.
Frankfurt
Rents have begun to flatten out, but will likely see further
increase by the end of 2017. The market is preparing for
inbound demand due to relocations from London.
2017 2018 2019
2017 2018 2019
Paris
Although growth has cooled somewhat, activity remains dynamic.
Vacancy has dropped to a potentially cyclical low of 3.5% in the
CBD, which will translate into upward pressure on rents.
Munich
Robust occupier activity in was well above medium and long term
averages. Vacancy has narrowed down to 4.2% and is likely to
decline further. Rents are likely to trend upward in the short term.
2017 2018 2019
2017 2018 2019
Landlord-favorable Neutral Tenant-favorable
5. Vacancy to rise incrementally across Asia apart from
Singapore, while Sydney will register rapid rent growth
Source: JLL Research 5
Beijing
Although new supply expected in the CBD will cause downward
pressure on rents, completions will be staggered over several
years.
Tokyo
Vacancy rose for the third consecutive quarter to 2.9% and is
expected to increase further as a wave of new construction
delivers gradually over the next three years.
Shanghai
Both the CBD and the decentralized market are expecting
further deliveries through year-end. The market will need time
to absorb new supply.
Hong Kong
Central rents jumped by 8.3% over the year to $178.80 p.s.f.,
surpassing their record highs set in 2008. Tenants will be
challenged by a lack of new supply in Central.
Singapore
Rents are expected to pick up moderately over the next few
quarters as the leasing market improves. Rents in 2019 and
2020 could expand in further on the back of limited new supply.
Sydney
Supply withdrawals due to residential conversion and
acquisition for new infrastructure will exacerbate constraints
and keep rent growth at or near the top of all global markets.
2017 2018 2019
2017 2018 2019
2017 2018 2019
2017 2018 2019
2017 2018 2019
2017 2018 2019
Landlord-favorable Neutral Tenant-favorable
6. 49,990
156,326
388,449
417,704
603,970
2,604,891
0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000
City Southern
City Midtown
City Western
City Central
City Northern
City Eastern
Under construction (s.f.)
London: firms will find the most opportunity for moving
to new supply in City Eastern
Source: JLL Research 6
7. U.S. legal services employment growth remains below
that of the broader economy amid talent challenges
from tech
Source: JLL Research, Bureau of Labor Statistics 7
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
12-month%change
Legal services Total non-farm Tech
+1.4%
Total non-farm
+0.4%
Legal services
12-month % change
+3.5%
Tech
Since 2010, US law firm admissions are down nearly 25% while
tech employment is up nearly 55%
12. -10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2010 2011 2012 2013 2014 2015 2016 2017
Rentgrowthsince2010(%)Rents for quality space in urban cores continue to
register growth double that of the overall market
12Source: JLL Research
+35.7%
CBD Class A
+17.7%
U.S. overall
13. $30
$35
$40
$45
$50
$55
10%
11%
12%
13%
14%
15%
16%
17%
2010 2011 2012 2013 2014 2015 2016 2017
CBDClassAaskingrent($p.s.f.)
CBDClassAtotalvacancy(%)
Total vacancy Asking rent
U.S.: An increasing rate of top-quality new supply has
resulted in slowly rising vacancy as well as rent growth
13Source: JLL Research
14. -1.6% -1.5%
0.2% 0.4%
0.9%
1.3%
3.8%
7.0%
7.4%
9.3%
11.9%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Houston Washington,
DC
Boston Los Angeles
(Downtown)
San
Francisco
Philadelphia New York
(Midtown)
New York
(Downtown)
Dallas Chicago Los Angeles
(Century City)
AnnualCBDClassArentgrowth(%)U.S.: Century City continues to see fastest rent growth
of any legal services hub, with no tenant relief expected
14Source: JLL Research
19. U.S.: Vacancy in law firm-heavy submarkets continues
to fall, pushing up rents dramatically
Source: JLL Research 19
12.5%
(-370bp)
CBD Class A vacancy
decrease since 2010
$52.19 p.s.f.
(+35.7%)
CBD Class A asking rent
Growth since 2010
20. New York: 1.1 m.s.f. in law firm relocations to the West
Side will open up significant opportunity in Midtown
Source: JLL Research – law firm leasing activity > 25,000 s.f. since Q1 2016 20
A
B
55 Hudson Yards 1 Manhattan West
A B
Milbank (257,557 s.f.)
Cooley (131,000 s.f.)
Boies Schiller (83,292 s.f.)
Skadden (550,000 s.f.)
McKool Smith (64,120 s.f.)
21. Washington, DC: Class A vacancy will rise to 20% as
new supply floods the market and large tenant demand
remains limited until 2020
Source: JLL Research 21
$66
$68 $67
$71 $72
$70
$69
$68 $68
12%
11%
13%
14%
15%
16%
19%
20%
21%
$50
$53
$56
$59
$62
$65
$68
$71
$74
$77
$80
5%
7%
9%
11%
13%
15%
17%
19%
21%
23%
25%
2013 2014 2015 2016 2017 2018 2019 2020 2021
Asking rent Vacancy
Projected
22. 5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
2014 2015 2016 2017 (YTD)
ClassAtotalvacancy(%)
West Loop Central Loop East Loop
Chicago: traditional law firm submarkets to become
even more tenant-friendly as vacancy spikes
Source: JLL Research 22
150 N Riverside and River Point causing rising vacancy
23. $54.12
$55.56
$59.40
$65.64
$50
$52
$54
$56
$58
$60
$62
$64
$66
$68
2014 2015 2016 2017 (YTD)
ClassACenturyCityaskingrents($p.s.f.)Los Angeles: dwindling large blocks have caused rents
to surge at double-digit rates
Source: JLL Research 23
$54.42
$64.78
$65.59
$67.83
$69.34
$0 $20 $40 $60 $80
Westwood
Beverly Hills
Century City
Playa Vista
Santa Monica
Class A asking rent ($ p.s.f.)