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News release


Competition Soars: Investors Seek to Dominate the Boston Skyline

JLL predicts Boston to be increasingly landlord-friendly in U.S. Skyline Review

BOSTON, March 11, 2014 - “Game on” seems to be the sentiment of buyers aggressively seeking office properties across the skyline markets of the United States. From local High Net Worth Investors (HNWIs) to international sovereign wealth funds (SWFs), competition is fierce for those planting their stake in iconic properties towering over American cities. Boston continues to be a target market for foreign and institutional capital investors, but trophy assets have not come to market fast enough to even begin to satiate demand.

“Foreign capital is extremely interested in Boston right now,” said JLL Research Director Lori Mabardi. “The share of foreign capital invested in Boston jumped to 20% in 2013, doubling from 10% over the previous 3 years.”

In Boston, sales were up 72% from 2012 levels, and the average deal size was $54.5 million, which is about $20 million more than 2012. Sixty percent of sales were in the Central Business District. Three partial sales were made in the tower set. Most sales occurred in the Class B segment of the market, which is a segment that has garnered a lot of attention in this recovery from both from tenants and investors.  

Thanks to intense capital demand, rents among trophy assets in the U.S. are soaring, even more so than rising leasing demand, according to JLL’s Spring 2014 U.S. Skyline Review.   

JLL’s proprietary Skyline report identifies and tracks micro-segments of 43 city centers across the nation. The Skyline features Trophy and Class A buildings where tenants and investors alike focus demand for office space in a flight to quality and efficiency.  Check out the themes that shape the U.S. skyline.

Competition for office properties across skyline cities in 2013 propelled vacancy levels to an average 13.4 percent and 170 basis points below the U.S. office sector. Boston’s vacancy rate in the trophy assets reached 11%. “While there was some negative absorption due to a small number of space consolidations,” noted Lori, “the underpinnings are still strong in Boston which has seen rents grow by almost 7 percent year-over-year.”

“Investors across the spectrum continue to narrow their focus to the skylines of their respective markets--bidding for not only the top-tier, trophy assets but also the value-add properties in the mix. Anything to garner an asset within the skyline,” said Steve Collins, International Director at JLL. “Primary markets such as New York, San Francisco and Chicago saw year-over-year investment sales growth of more than 43 percent, but they’re not the only beneficiaries. Secondary markets such as Raleigh, Miami and Philadelphia experienced pricing gains per square foot that exceeded their primary brethren.”

In spite of tightening market fundamentals, construction remains limited. Ten Skylines nationally have vacancy levels below 10 percent, with seven showing no current development and two seeing just one proposed project. The constrained development pipeline has led to climbing rents: over the past three years, rates in the skylines increased 17.1 percent compared to the 9.8 percent increase seen by the broader market.

In Boston, there is no new speculative supply coming in the market yet and the construction pipeline consists of built-to-suit projects likely to deliver 24-48 months from now. “This dynamic is likely to lead to further tightening in the near to mid-term, and create an environment where landlords have increasing leverage,” Lori noted.  
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About JLL
JLL (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 $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. For further information, visit