Embed Size (px)
Citation preview
JLL Research Report
Detroit | 2017
Law Firm Perspective
Detroit
2
• Availability for Class A office space in the Detroit CBD is essentially nonexistent, particularly in the Campus Martiusarea of Downtown.
• Metro Detroit suburbs, particularly Southfield and Troy, where law firms have traditionally focused, are still feeling the effect of the Downtown’s resurgence. Landlords there have been upgrading their assets in order to remain competitive with CBD buildings.
• As many buildings are being renovated and quickly leased, new CBD construction is on the horizon with multiple new developments set to deliver over the next 24-36 months, adding options for firms.
• Rent growth for existing buildings has slowed even as vacancy continues to decline. However, rents will increase ahead as CBD new construction is priced at nearly a 20% premium.
Where are we now? Where are we headed? Square feet and rent per attorney:
Historic:
850-1,000 s.f. | $27,500
Current:
650-800 s.f. | $25,000
Target:
550-650 s.f. | $23,500
2017
Leverage:
Landlord Landlord Neutral
2018 2019
Law Firm Perspective | JLL | 2017
Renewal (CBD)
5 yearsTerm
$26.00Base rent (p.s.f.)
$0.50Annual escalation
$10.00 / 0 TI allowance/free mos.
Renewal (Suburbs)
5 yearsTerm
$22.50Base rent (p.s.f.)
$0.50Annual escalation
$5.00 / 0 TI allowance/free mos.
Relocation (CBD)
10 yearsTerm
$25.00 Base rent (p.s.f.)
$0.50Annual escalation
$30.00 / 5TI allowance/free mos.
Typical lease terms
Relocation (Suburbs)
10 yearsTerm
$22.00Base rent (p.s.f.)
$0.50Annual escalation
$40.00 / 5TI allowance/free mos.
CBD and suburban absorption is down compared to prior years
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2014 2015 2016 2017(YTD)
Net
abs
orpt
ion
(s.f.
)
CBD Suburbs
Flight to CBD Class A product can be seen in the change in vacancies
6%
8%
10%
12%
14%
16%
18%
2014 2015 2016 2017 (YTD)
Tota
l vac
ancy
(%)
CBD Suburbs
Class A rent growth has stagnated due to lack of quality space
CBD construction pipeline set to rapidly expand in the coming years
$20
$21
$22
$23
$24
$25
2014 2015 2016 2017 (YTD)
Aver
age
aski
ng re
nt ($
p.s.
f.)
CBD Suburbs
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2017 2018 2019 2020+
Com
plet
ions
(s.f.
)
CBD Pipeline Suburban Pipeline
Flight to quality results in dwindling supply, and thus, new construction
© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
About JLL Law Firm Group
The JLL Law Firm Group provides strategic and innovative real estate solutions tailored to meet the uniqueoperational and financial objectives of law firms. Our multi-disciplinary senior-level team has deep experience working both in and with law firms, and has a proven track record of consensus-building. Our global expertise coupled with local market knowledge enable us to work with firms of all sizes and ensure you are proactively dealing with the ever-changing real estate and economic markets.
About JLL Research
JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions.
Contact:
Harrison WestResearch Analyst+1 248 581 [email protected]
