Office Rents in Secondary Markets Soar

Oakland has begun attracting a lot of firms pushed out of the expensive San Francisco market.

CHICAGO—As reported yesterday in GlobeSt.com, landlords still hold the upper hand in the nation’s primary markets, even ones such as Chicago which have relatively active development pipelines and millions of square feet set to open in the next year. But landlords’ advantage in secondary markets, few of which have seen any significant development, is much greater, especially when it concerns class B office space, according to a new report on the second quarter by JLL.

“There is a heightened demand for class B space,” says Julia Georgules, vice president and associate director of US office research at JLL, especially in markets that are adjacent or near to primary markets such as San Francisco. “Oakland is really starting to benefit from being in the Bay Area.” Tech firms have begun to migrate into the city, and have helped drive the overall vacancy rate down into single digits, with class B sinking to just 3.1%. “As a result, landlords feel they can push up rents,” and class B rents in Oakland have increased an astonishing 22.1% just since the end of 2015.