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News release

DETROIT, MI

Detroit’s Digital Skyline Report Reveals Local Market Trends: Trophy Office Rent Soars

JLL releases its 2015 building-by-building Skyline report on Detroit’s commercial real estate market


DETROIT, June 3, 2015 – There’s no space like Trophy space. The premiere office towers that make up Detroit’s skyline boast—by far—the most expensive office space to rent, garnering over 11 percent more than non-Trophy space, according to JLL’s 2015 Digital Skyline. Average Trophy rates in the first quarter of 2015 were $25.54 per square foot, as compared to $22.86 per square foot in non-Trophy buildings.

Looking ahead, Trophy tenants can expect little relief in rental rates in the near future. Detroit office demand has experienced an upsurge over the last five years and further demand growth is projected.

“Trophy space in the Detroit skyline is limited,” says Andrew Batson, Senior Research Analyst at JLL. “With landlords firmly holding negotiating leverage, look for further increases in rates.”

JLL’s proprietary 2015 Digital Skyline identifies and tracks micro-segments of 47 city centers across North America. The Skyline features Trophy and Class A buildings where tenants and investors alike focus demand for office space in the highest-quality and most efficient assets.

Foreign investors show increased interest in the U.S. skyline

Foreign capital is playing a starring role in commercial real estate transactions across the U.S. Of the $35.3 billion transacted over the past five quarters across the U.S., 34.6 percent was driven by international buyers. In Houston and Seattle, every office deal transacted during this time period had a foreign buyer, while in Washington, D.C., Boston and New York, offshore capital led more than 50 percent of office purchases.

Domestic investors Dan Gilbert and Bedrock Real Estate Services have dominated investment in Detroit. However, there are a few examples of foreign capital investment, notably purchases by companies tied to billionaire Carlos Slim and tycoon Jimmy Lai.

Tenants and investors look to lower-class assets for customizable space

As investors begin to diversify beyond the Trophies for investment opportunities, a growing segment of tenants are also turning away from skyline buildings in favor of non-core Class A and Class B buildings. The perception of an “address” has been replaced by the desire for highly customized office space, particularly among fast growing tech and other creative companies.

But the trend does not stop there: It’s not just tech companies looking for dynamic, flexible office space. The growing millennial workforce and their employers are increasingly drawn to architecturally significant Class B buildings located in dense neighborhoods packed with amenities. This increasing interest in Class A and B buildings extends to the Detroit market.

“The majority of investments in the Detroit skyline in recent years have been value-add plays in non-Trophy assets,” Batson added. “A number of value-add opportunities remain available for interested investors in downtown Detroit.”

Visit the full Detroit Skyline for more.

About the Skyline Review
For the first time, investors and tenants alike can now access JLL’s Skyline Review via a digital platform. The fully interactive website will feature JLL’s proprietary market insights regarding office supply, demand, rents, leverage and investment in 47 markets across the United States and Canada, with the ability to compare and contrast individual markets or multiple markets. In addition, the site will offer videos and infographics. All information will also be available via mobile access. Users can also directly access information about Detroit’s Skyline.

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 fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000.  On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $55.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.