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News release

CHICAGO, IL

Confidence in U.S. Office Market Builds; Activity Moves at Faster, More Sustainable Rate

Q3 2013 sees shift to landlord-favorable territory, expansion across industries and geographies, and construction ramping up


CHICAGO, Oct. 14, 2013 — The third quarter 2013 marks the first time in seven years that the U.S. office market can look more confidently toward 2014 with leasing activity, expansion and pricing picking up at a faster, more sustainable rate across the nation.

Jones Lang LaSalle’s Third Quarter 2013 Office Outlook report points to several confidence-building market moves:

  • Office rents are up, and concessions are down—even in secondary and tertiary markets— turning the office market into landlord favorable territory.
  • Quarterly rent growth of 1.4 percent was the highest quarterly jump of the recovery, annualizing at a rate of 5.6 percent.
  • Absorption levels continue with the 14th consecutive quarter of occupancy growth, the last two quarters above historic norms.
“There is resurging strength in the U.S. office market buoyed by improving fundamentals and a pick-up in expansion activity across diversified industries and geography,” said John Sikaitis, Director of Office Research for the Americas at Jones Lang LaSalle.
“In prior quarters, expansion activity was focused in tech and energy-centric markets,” said Sikaitis, who also directs local markets research. “This quarter, more than 87 percent of markets have posted positive absorption through October. We expect these gains to move higher into 2014 as more than half of the markets reported stronger tour activity this quarter. The markets that were particularly strong movers are those that have lagged the domestic recovery for more than two years: Atlanta, Chicago, and Florida.”
The U.S. office construction pipeline is also beginning to pick up, surpassing the 50-million-square-foot mark for the first time in six years. The high-tech and energy-centric regions are leading construction activity, as a result of their earlier recovery in 2011 and 2012. Construction in Texas and Northern California will comprise a proportionately larger share of this U.S. construction activity.
 
Looking ahead Sikaitis says, “The U.S. office market is poised to maintain its recovery as the geographic spread widens. Keep an eye on external economic influences particularly on the U.S. political front as potential thwarts to the current momentum.”
 
Third Quarter Leasing Highlights:
 
Other significant findings from Third Quarter 2013 U.S. Office Outlook:
  • Investment Sales: Sales activity rose across the United States compared with second quarter 2013, with an intense amount of foreign interest in New York, Washington, D.C., Chicago and Los Angeles. Houston also saw an increase in sales activity given the local energy and tech industry growth, while Los Angeles’ four large sales reflected the slow-but-steady capital markets recovery.
  • Healthcare: The growing healthcare sector is adding tenant requirements in markets all over the United States. This has been particularly noticeable in markets ranging from Boston to Baltimore to Florida to Phoenix to Sacramento in line with the increasing demand from “eds and Meds’ employment and health care reforms.
  • Market Standout: Phoenix: Driving the Sunbelt’s recovery, Phoenix experienced a number of very large leases including a 2.0 million square foot commitment in a new development, and a 135,000 square foot deal by a financial service firm.
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About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information, visit www.jll.com.