New supply outperformance intensifies when recent development is scarce

October 17, 2023
  • Jacob Rowden

Source: JLL Research
Note: Rent premiums depict asking rent premiums in peak deliveries and post-peak deliveries relative to the remainder of Class A and Trophy space in the market. Rent premiums are weighted by building size and market inventory.

  • During the office market’s recovery from the Global Financial Crisis, a notable performance spread emerged nationally between new product developed at the peak of the development pipeline, and post-peak deliveries that completed at the tail end of the development cycle or early stages of the next cycle. 
  • Despite only being marginally newer than “peak deliveries,” “post-peak deliveries” generated an over 10% larger premium to Class A asking rents in their respective markets which persisted for more than a decade, by virtue of having an extended period of being the newest cohort of office buildings.
  • Post-peak deliveries in the last cycle also outperformed by a notable margin in maintaining high occupancy rates: despite a marginally slower lease-up than the historical average, scarcity of newer product when market conditions began to accelerate caused these assets to stabilize at a higher occupancy rate, averaging over 95% occupancy for four consecutive years, and averaging 3.6% higher occupancy than new product historically for a decade following stabilization.