WASHINGTON, DC—There are a couple of clear correlations between submarket office fundamentals and transit accessibility. One is that vacancies tend to be lower—by an average of 370 basis points—and asking rents higher in these neighborhoods, and another is that new construction is concentrated in areas where mass transit is either available or is slated for delivery.

Take the suburbs of Washington, DC, where Scott Homa, US director of office research at JLL, is based. The Metro rail and bus system's Silver Line Corridor in Northern Virginia, stretching from Tysons Corner to Dulles Airport, is seeing 2.1 million square feet of development, largely near existing or in-progress stations, according to a new JLL report.

Elsewhere in the DC region, the Bethesda and Chevy Chase submarkets, both served by Metro lines, have single-digit vacancies while nearby neighborhoods are well into the double-digit range, and they represent the only submarkets in suburban Maryland with class A rents exceeding $40 per square foot. Even car-dependent Los Angeles is getting with the program, and developers across a variety of property types—initially in the multifamily sector, but increasingly in office and hotel as well—are stepping up activity in neighborhoods such as Hollywood, Downtown, the Arts District, Santa Monica and Culver City, all with burgeoning mass transit service.

“There has been a seismic shift in workforce preferences to urban areas,” Homa tells GlobeSt.com. “You're seeing it in the disproportionate Millennial population growth in these urban areas and, at the same time, a steady decline in the share of the population with driver's licenses, vehicle miles traveled per capita and other metrics that would support the traditional suburban office park.”

For that reason, Homa says, the past several years have seen a number of notable companies moving their offices to comparatively transit-accessible downtown locations. He cites GE, Marriott, Kraft Heinz, UBS and United Continental as examples: “blue-chip names that have recognized the changing dynamics, especially as they relate to recruiting young talent that no longer characterizes public transit as 'nice to have' but rather as a critical box to check.”

More urban markets will be served by mass transit in the future, says Homa. JLL's report cites the example of Denver, which in 2004 enacted the FasTracks program to build what eventually will be 122 miles of rail lines along with complementary bus service. “These lines will ease flow into the Downtown core and fringe, where urban infill continues at a brisk pace near Union Station, the traditional CBD, LoDo and RiNo,” the report states.

And in South Florida, “geographic constraints, population growth and inbound capital flows are pushing the existing transportation network to a breaking point,” according to JLL's report. Into this quandary comes the Florida East Coast Railway via investment in Brightline, a higher-speed regional rail service connecting Miami, Fort Lauderdale and West Palm Beach, and potentially extending northwest to Orlando.

The new service's Miami station, to be known as MiamiCentral, will become the largest public transportation facility in South Florida and connect regional and commuter rail to the city's rapid transit system with integrated mixed-use development. JLL's report notes that 280,000 square feet of office space is currently under construction at MiamiCentral, anchored by Cisneros and EY. “It will also be the focal point of regenerating Downtown.”

At present, just under 30% of the existing transit-accessible office space is located outside New York City, itself a hotbed of transit-oriented development with the massive Hudson Yards mixed-use project and the One Vanderbilt tower that will rise near Grand Central Terminal. “There's a relative tightness in these transit-accessible locations,” Homa says. “On balance, they're 12% vacant compared to almost 16% vacant for office product that is not served by mass transit. So you see a very clear disparity as it relates to availability of space as well as pricing, with a very significant premium charged by owners in those transit-served locations.”

Instant Insights /

Where Transit Goes, Office Tenants Follow

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