JLL Report: Most Expensive Streets 2017

Office tenants—particularly those in the financial, legal and technology industries—remain willing to dole out the big bucks for premier space on the most coveted boulevards across the country.
Fifth Avenue, New York City
Fifth Avenue, New York City

JLL recently released its 2017 Most Expensive Streets report, and while some of the rental rates have changed notably since the commercial real estate firm’s last biennial study in 2015, the new report reveals that an ample number of companies in the U.S. remain more than willing to pay a pretty penny for office space at the right address.

The renowned Fifth Ave., San Francisco’s Mission St., Pennsylvania Ave. in Washington, D.C.—the usual suspects still hold a spot on the list of the top ten priciest streets. “The best streets remain the best streets and continue to garner the highest rents. That’s because the ingredients that make a street a top performer are about a number of factors, including quality of the buildings, quality of the office tenants, amenities, street activity, walkability, and complementary uses such as residential,” Walter Bialas, vice president, market research, told Commercial Property Executive. “While areas do evolve, the drivers that make them the ‘best’ often take considerable effort—and time—to change.”

Sand HIll Rd., Menlo Park, Calif., Metropolitan San Francisco
Sand HIll Road, Menlo Park, Calif., Metropolitan San Francisco

Fifth Ave. may command the highest figures for retail square footage, but in the office sector, metropolitan San Francisco’s Sand Hill Road in the City of Menlo Park ranks as the most expensive street in the U.S., buoyed by some of the country’s top venture capital firms. Sand Hill records average asking rents of $119.38 per square-foot, marking a 157.9 percent premium over the rest of the market, and some prices reach as high as $185 per square foot.

Closely following Sand Hill is Fifth Ave., where hedge funds, investment banks and law firms are keen to set up shop and pay the average asking rent of $116.04 per square-foot. San Francisco’s Mission St., a high-tech and finance haven, metropolitan Boston’s Main St. in Cambridge and Greenwich Ave. in Fairfield County, Conn., take the third, fourth and fifth spots, with respective rents of $93.68, $90 and $86.53 per square-foot.  And with rents ranging from $80 down to $55.20 per square-foot, the last five spots are held by Pennsylvania Ave. in Washington, D.C.; Ocean Ave. in Los Angeles; Boston’s Boylston St.; Royal Palm Way in West Palm Beach; and Austin’s Congress Ave.

 The push behind the price

“The drivers for these expensive streets vary considerably by market,” Bialas said. “Many markets covered have seen limited new office construction.  Because demand has been high in these locations, rents have continued to increase in these best-in-class properties. In some cases, rents are up because the locations have become homes for hot technology tenants, like in Cambridge, San Francisco, and Austin.”  In Dallas and Philadelphia, the recent delivery of high-quality office and mixed-use developments has bolstered rents. On McKinney Ave. in Big D, and 30th St. in Philly, the average asking rent is $51.17 and $48.30, respectively. “These new properties have experienced strong pre-leasing / leasing at above average rents, which clearly demonstrates ‘market acceptance’ for higher rents for the right tenants. These higher rents have buoyed rents in neighboring older buildings, causing an overall uptick in the market,” added Bialas.

While rents have decreased along some of the 47 stretches JLL surveyed this year—the asking price on San Francisco’s Sand Hill was $141.60 per square-foot in in 2015, compared to $119.38 per square-foot this year—the $48.65 per square-foot average asking rent for the entire group of high-profile promenades is higher than the $46.36 per square-foot average in 2015.

On the most expensive streets, the sky-high pricing is still the limit.

Image via Google Street View