Class-A Properties Seeing Higher Rents, More Construction
We’re experiencing good news on several fronts regarding the property market and ultimately the commercial insurance opportunities that come with it. As we previously discussed, we’re seeing a marked uptick in the construction of apartments and other multifamily buildings. We’re also seeing the condominium construction market rebound with cities like Miami and others boasting high condo prices and fast sales. The latest good news comes from the commercial office sector, which has turned around and with Class-A trophy properties showing the greatest comeback.
In a recent article in National Real Estate Investors (NREI), Class-A office space “attracts the most demand, both in traditional primary markets and those led by energy and technology booms”. The article cites recent statistics from a report, “United States Skyline Review”, by commercial real estate services firm Jones Lang LaSalle (JLL,) indicating that the average rents for trophy properties hit $40.73 per sq. ft. in 2013, reaching past the $40 per sq. ft. mark for the first time ever. What’s more, according to JLL, most trophy properties are reporting record rent increases.
Also, demand for these types of properties will result in more offices in the national construction pipeline. According to JLL, there’s already about 17 million sq. ft. of office space in the works, mostly in the major markets of New York City, Houston, and San Francisco.
“I think you’re going to see a wave of new development announcements in the next 12 to 18 months,” said John Sikaitis, managing director of research at JLL. “I don’t think it will be all at once, the developers will put more thought into what’s coming out at once. It won’t be the same as 2005-06, when you would have five or six developers breaking ground on towers at the same time in a city.”
What’s more, JLL sees major office tenants taking more care in terms of where to locate, with buildings positioned near entertainment and transportation hubs, which are now considered the top employee draws. Also, developers are shifting towards a more open-space environment to attract large-scale tenants, which the Millennial generation prefers. The U.S. Bureau of Labor Statistics expects that Millennials will make up nearly half of the country’s workforce by 2020.
Just as with other areas of property construction and rental turnaround, insuring these types of buildings and others is an opportunity for brokers to expand their footprint. At IPOA, we specialize in insuring national properties, providing Property insurance coverage with schedules up to $250 million and a capacity of $50 million per location (Tier 1 and 2 locations). We not only insure Class-A trophy office buildings but also offer coverage for all types of construction classes under our Program Division. Within our Brokerage Division, we can write schedules up to $1 billion and also write coastal properties.
Give us a call at 877.653-IPOA (4762) to find out more our niche programs.
Source: NREI, JLL Report