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Private sector office tenants are branching away from core downtown submarkets in recent years

• Private sector companies spend valuable time and resources when evaluating their office location. In the past, their options were simple: a 15-block range in the CBD and East End. However, new development is changing both where companies move in the core and the emerging non-core submarkets (NoMa, Market District, Ballpark and Southwest).

• From 2011 to 2014, there were 29 private sector relocations > 40,000 s.f. in the CBD and East End and from 2015 to today, the number of relocations in the CBD and East End jumped to 36, a 24% increase. The increase in relocations in recent years has largely benefitted the CBD due to new construction. Of the 17 relocations in the CBD since 2015, seven were tenants previously located in the East End with six of those relocations to new construction

• One of the more significant trends in the office market though is tenants across all industries expanding their geographic boundaries. From 2011 to 2014, there were seven private sector relocations > 40,000 s.f. in the non-core submarkets. In the past 40 months, relocations more than doubled to 16 with Southwest posting the most with four private sector relocations since 2015.

• With new construction options outside of the Wharf offering a 30% rent discount to the core and relet Class A options offering a 25% discount to the core, non-core submarkets have become an increasingly viable option for many companies as they evaluate their real estate decision and that trend will only gain steam as markets like the Yards and Market District deliver their first office product ahead.

Source: JLL Research

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