U.S. Office Buildings with Upscale Tenant Amenities Still Enjoy Premium Rents in 2024

U.S. Office Buildings with Upscale Tenant Amenities Still Enjoy Premium Rents in 2024

Commercial News » New York City Edition | By Michael Gerrity | April 2, 2024 8:05 AM ET

Based on a new report by global property consultant JLL, as demand for high-quality and differentiated office assets intensified during the pandemic, highly amenitized office buildings are expanding their outperformance against the broader market, particularly those that offer enhanced gathering spaces and prioritize wellness.

JLL says highly amenitized buildings--assets with 10 or more tagged amenities and at least one differentiated offering like a roof terrace or full-service fitness center--have resisted the broader downsizing trend impacting the U.S. office market. These buildings have collectively gained 23.3 million s.f. of net absorption since the onset of the pandemic, while the remainder of urban Class 'A' product has lost more than 50 million square feet of occupancy.

Differentiation and quality are the primary drivers of rent premiums gained through amenitization: while buildings with fitness centers only generate a 0.5% rent premium to peer assets, buildings with a full-service fitness center inclusive of locker room and shower facilities generate a more than five times larger rent premium than baseline. Similarly, buildings with some form of food service or restaurant in the building are only associated with a negligible 0.1% rent premium against peer assets, but buildings with the more enhanced offering of a food hall generate a 1.4% rental premium against peers.

Many of the strongest rent premiums are associated with enhanced outdoor gathering spaces: outdoor roof terraces, and courtyards with outdoor seating areas generated the most significant rent premiums against peer assets of the amenities analyzed, says JLL.

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