Concessions as Good as They Will Get

The office market has been very consistent for the last several quarters.

HOUSTON—Since the fourth quarter of 2014, the office market has been characterized by rising vacancy rates, flattening asking rents, growing concession packages and a glut of sublease space. The phenomenon of 12 to 15 months of free rent on a 10-year deal is not uncommon for class-A space as well as tenant improvement allowances at more than $50 per square foot.

While vacancy rates and asking rents maintained these trajectories through the first quarter of 2018, concessions appear to be leveling off as more tenants engage the market to take advantage of favorable lease terms. Concessions will begin to fade particularly as the development pipeline tapers off, sublease space is absorbed and the newest, most efficient space is leased. To put it succinctly, concessions are about as good as they are going to get, according to JLL’s first quarter office market insights.