Office Concessions Growing Throughout US

The average TI allowance in the Chicago CBD’s class A properties hit $77.65, according to JLL. New York and Washington are even higher.

CHICAGO—The US office market has finally begun hitting a peak after nine years of expansion. And the vast amount of new class A space that developers recently created in many major markets, or will soon finish, has changed the supply-and-demand dynamics in favor of tenants, according to JLL’s first quarter office outlook report. In response, landlords across the nation have boosted the value of their tenant concession packages. And in some cities, those offers have led to flat or even declining effective rent growth.

“The tenant improvement packages go hand-in-hand with new deliveries,” Scott Homa, JLL’s director of office research, tells GlobeSt.com. Otherwise, prospective tenants may get “sticker shock.” And even though the most valuable packages are for new trophy spaces and other class A properties, that “sets a new benchmark, and owners of second generation buildings need to follow suit.”