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News release

CHICAGO, IL

U.S. Office Sector Continues to Tighten with Declining Vacancies, Increased Rates of Absorption and Upward Momentum in Rents

Jones Lang LaSalle grows business as investor competition among all sizes of office portfolios remains stiff, necessitating expertise in leasing, reducing costs and efficiencies


CHICAGO, Jan. 23, 2012 – The U.S. commercial office market experienced its seventh consecutive quarter of tightening in the fourth quarter of 2011, allowing commercial real estate firms to expand their teams and grow their portfolios as the market slowly gains momentum with increasing absorption and slightly improving rental rates in 2012.

“Despite the heightened economic volatility, most key markets are making steady gains and are better off than they have been in several years,” said Gregory Green, President of Jones Lang LaSalle’s Agency Leasing business. “Still, investors are not taking great risks: They’re mainly focusing on core product, and some corporations are delaying real estate occupancy decisions that can weigh heavily on property cash flow. Ultimately, there is growing activity, and investors are entering the new year aware of the leasing competition against their assets in today’s improving market.”

Overall, the U.S. office sector experienced 10.6 million square feet of net absorption in the fourth quarter and nearly 35 million square feet of occupancy gains throughout 2011. Vacancy is expected to dip below 17 percent for the first time in four years, and absorption continues to hover around 1 percent of overall inventory, likely leading to marginal upward momentum in rents, nationally, in 2012.

Jones Lang LaSalle, specifically, won 76 commercial office leasing assignments and 13 million square feet in the fourth quarter—totalling 173 assignments and 37 million square feet in all of 2011. The firm also won 26 commercial office management assignments and nearly 8.3 million square feet in the fourth quarter—bringing management gains to 66 assignments and 21 million square feet in the commercial office sector during 2011. 

Although these indicators are positive, owners and asset managers must continue to focus on reducing costs while offering a quality level of differentiated services to attract and keep tenants. Owners and asset managers of the 1.2 billion square feet of office space in the middle market sector (75K-300K-size buildings), especially, will have to concentrate on differentiating their product to remain competitive, as service and amenities increasingly become a trump card.

“There is no shortage of middle-market, multi-tenant office space, meaning such properties must distinguish themselves as unique and a step above their surplus of competitors to win business,” said Dan Pufunt, President of Property Management for Jones Lang LaSalle. “Middle market portfolios face many of the same challenges that trophy buildings face, such as retaining tenants, maximizing building operating efficiency and reducing energy costs. That’s why Jones Lang LaSalle caters to both market sectors—offering cost efficiencies and differentiated services. We design tailored solutions for owners and operators of all sizes.”

Deepening its reach into the middle market sector, Jones Lang LaSalle won a 1.2 million square-foot portfolio of middle market Class A office properties in Florida from Equity Office Properties Trust in the fourth quarter of 2011. The firm was also awarded a LaSalle Investment Management Portfolio of 376,000 square feet in San Francisco during the fourth quarter.

Beyond the middle market, Jones Lang LaSalle expanded its presence in the industrial sector as well—particularly in property management. The firm added approximately 8.1 million square feet of managed industrial space in the fourth quarter, and between 35 and 40 million square feet of managed industrial space in 2011, showing even more opportunities for growth outside of trophy office properties.
“We’re seeing the demand for leasing and management services expand beyond office properties, as investors are now outsourcing their industrial assets in an effort to gain operating efficieny,” Pufunt said. “They are partnering with Jones Lang LaSalle to leverage their centralized operating platform.”

To meet current and future tenant demand, Jones Lang LaSalle added 30 seasoned office leasing brokers in the fourth quarter for a total of 56 new hires in 2011, as well as 43 property managers in the fourth quarter for a total of 395 new hires in 2011.

“Expanding our leasing and property management teams enables Jones Lang LaSalle to provide more comprehensive services, as well vast local market knowledge—helping owners of all sizes position their assets for long-term success,” Pufunt said.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $47.9 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.