Why companies are flocking to premium urban offices
Best-in-class buildings are helping companies lure workers back to city centers
One Vanderbilt, a 93-story skyscraper in the heart of New York City, was completed in late 2020. At the start of 2022, it has almost no spare office space for rent.
It’s not alone. A similar pull to buildings that tout best-in-class facilities has been seen across the U.S.’s biggest city, including other relatively new projects like 425 Park and 50 Hudson Yards, as companies upgrade their offices as part of an effort to lure employees away from their work-from-home lives.
Top-priced buildings in Midtown–where One Vanderbilt is located–last year caught up with Hong Kong’s main business district as the most coveted by tenants, with rents of up to $261 per square foot.
Premium office space in urban cores in many established cities worldwide is proving resilient amid the pandemic, retaining a high demand from tenants compared to less central or suburban locations.
“We learned a lot during COVID-19. Technology may allow us to work from home, but it also isolates us and blurs the lines of home and work,” says Peter Riguardi, chairman and president of JLL’s New York Tri-State regions. “There’s nothing like the energy of the office to bring colleagues together, which is why corporates are willing to pay a premium for that space.”
Long considered one of the global gateway cities, New York is set to continue to see strong demand, Riguardi says. The growing war for talent, a flight to quality, and an infrastructure bill expected to boost transit infrastructure around Penn Station and airports, will make the city even more desirable, even as some employees clamor for more flexibility in where they work.
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Beyond the office
And it’s not just office space that’s springing back. Apartment leasing has also surged quite a bit in New York City – signifying a considerable return to the urban core, says Phil Ryan, JLL’s U.S. Office Research Director.
The top priced block of rents in New York City are up 22.8 percent over the year as the market corrects after seeing rents drop sharply in 2020
“As things have come back and restrictions have gone away, there is a large segment of the population, particularly younger workers, who still want that amenity-rich lifestyle,” Ryan says. “Dense cities like New York provide them with fantastic public transit and an abundance of cultural amenities and nightlife. It just exists naturally at a greater scale in urban cores.”
The region’s ability to attract talent – something fast-growing sunbelt submarkets struggle to scale – also plays heavily in the attractiveness of gateway cities, he says
“When you’re talking about talent pool and talent attraction, the first thing to look at is the scale of your talent—the breadth of it—and the reality is that there are very few places with that sort of base pool of skilled talent (in particular, in finance, tech, and creative media),” Ryan says.
Jeremy Kelly, lead director of JLL’s Global Cities Research, says that CBDs are finding new energy and purpose globally.
“This concern that we were all going to run to the hills during the depth of the pandemic has not materialized. Instead, premium space in highly accessible locations with excellent amenities will continue to outperform,” he says.