Cities Where the Office Rents Run High
West Coast cities dominated the rankings, with 28 cities placing among the top 50 submarkets.
Menlo Park was the most expensive office submarket by asking rents in the fourth quarter, with an average of $118.73 per square foot, according to a new report from CommercialSearch.
West Coast cities dominated the rankings, with 28 cities placing among the top 50 submarkets CommercialSearch surveyed. Of that number, 27 were in California and one was in Seattle’s Bellevue neighborhood.
“Asking office rents averages among these Golden State submarkets ranged from $46.55 per square foot for office space in University City, San Diego to $118.73 per square foot in Menlo Park,” the CommercialSearch report notes. “Of these, submarkets in San Francisco accounted for a small majority — representing nine of California’s 27 entries — while the Bay Area and Los Angeles each contributed seven. San Diego submarkets accounted for the remaining four California office submarkets to make the cut.”
The second-largest regional group in the ranking was dominated by 12 Northeastern US submarkets, including six in Manhattan. The remainder are in Connecticut, Massachusetts, New Jersey, and Pennsylvania.
Average asking rents in the top 10 most expensive office submarkets ranged between $74 and $119 per square foot. The Plaza District in Manhattan followed Menlo Park in second place, with an average asking rent of $107.41 per square foot, followed by Mountain View – West in the San Francisco Bay Area ($95.64 psf), Palo Alto ($93.49 psf), Redwood City ($92.50), Chelsea in Manhattan ($84.67), Times Square/Hell’s Kitchen in Manhattan ($81.24); Sunnyvale-West in the Bay Area ($78.01) Beverly Hills ($72.20), and the South Financial District in San Francisco ($74.83).
“During the second year of the pandemic, the U.S. office market continued its exploration of modern work environments,” the report notes. “It also saw a significant increase in investment toward life science and medical office properties, which contributed to lifting some markets up among the most desirable destinations for capital in 2021.”
Indeed, a growing number of employees are returning to the office, though still below the most recent peak of last December between the Delta and Omicron waves. Marcus & Millichap’s John Chang recently predicted that absent another wave of new COVID infections, we’ll “finally’ begin to see how the future of office demand plays out.