Steep rent isn’t a deterrent for the many corporations occupying the U.S.’s most coveted office addresses.
Office buildings in 47 of the most high-profile locations across the nation asked an average of $48.65 per square foot in rent in 2017. That represents a premium of almost 47 percent over the rest of the country, according to JLL’s 2017 Most Expensive Streets study.
And yet, these buildings seem to have no trouble attracting tenants, with just 12.8 percent of space vacant—250 basis points below the U.S. average. Asking prices in the top 10 are even more jaw-dropping, ringing in at an average $85.28 per square foot—with just 12.3 percent vacancy.
What’s driving demand in such expensive space? “Global finance and law firms have traditionally invested in high-profile streets like Fifth Avenue—and they still do,” says Scott Homa, Senior Vice President and Director of U.S. Office Research at JLL. Merrill Lynch, for instance has homes in three of the top 10 priciest streets, in Fairfield County, Washington, DC and West Palm Beach.
Yet they increasingly have new neighbors. “Tech companies are adding to the demand now more than ever,” he says. “As these companies mature, their real estate strategies increasingly mirror traditional white-collar industries. As a matter of fact, five of the top 10 most expensive streets today are tech hubs.”
And he’s not just talking about the San Francisco Bay Area’s Sand Hill Road, either. “We see tech firms maturing and moving into more premium space in cities like Boston, Cambridge and Austin,” says Homa.
And while top-notch office buildings have an allure, it’s people who are really the big draw. “Companies are following the talent,” says Homa. “Most of the most expensive streets are in cities known for their innovation and global connectivity.” Notably, with the exception of Austin, the top ten are exclusively located in coastal areas.
Sand Hill Road, San Francisco Peninsula
Nicknamed “the Main Street of Venture Capital,” this private equity hotspot in Menlo Park, California offers easy access to Silicon Valley. With close proximity to research hubs like Stanford University and the Department of Energy's SLAC National Accelerator Laboratory, it's convenient for venture capitalists seeking worthy investments. Asking rent along this 5.6-mile stretch of road averages $119.38—the nation's highest full-service rent. Still, willing tenants abound, including Jurveston, Khosla and Jones Day. Kleiner Perkins Caulfield Byers was the first venture capital firm to establish itself here back in 1972. Since then, venture capital has only continued to pour out of the street, into the coffers of tech firms of all size—including giants like Microsoft, Amazon and Facebook.
Fifth Avenue, New York
Popular attractions like the Empire State Building and Rockefeller Center may be located on 5th Avenue, but tourists have never been the only ones to appreciate this posh locale. Popular amongst hedge funds, investment banks and law firms, average office rents last year reached $116.04 per square foot. The GM Building commands the highest rents, topping out at $185 per square foot. But those numbers haven't deterred global firms like Weil Gotshal & Manges from taking space in the building or HSBC renewing its lease on a 548,000-square-foot office headquarters just down the street.
Mission Street, San Francisco
The complete transformation of Mission Street over the last two decades has attracted a unique blend of prominent tech and financial services tenants, who seem undaunted by the standard asking rents of $93.68 per square foot. Notable tenants along the thoroughfare include a range of enterprises, from Trulia and WeWork, to professional services firms Deloitte, EY and investment bank JPMorgan Chase. The newest addition to this prized locale is the Salesforce Tower, which once open in 2018, will be the city's tallest, most expensive building.
Main Street, Cambridge
Main Street runs through the heart of world-renowned innovation district Kendall Square, and boasts the lowest vacancy rate in the nation at 5.3 percent, despite charging the nation's fourth highest rent. Tenants here pay $90 per square foot on average, which represents a 143.6 percent premium compared to the rest of the Boston area. Along this truly buzzing stretch of road, tenants like Amazon, Google and Microsoft are all just a block or two away from each other. This is no coincidence, of course. Boston ranks seventh in the country for top tech markets, with tech firms gobbling up 40 percent of the city's leasable space in their effort to attract high-caliber talent.
Greenwich Avenue, Fairfield County
Known for historic architecture, and historically high rents, this suburban Connecticut enclave is teeming with upscale retailers and restaurants—and a robust mix of hedge funds and financial services offices. Rents here average $86.53 per square foot, with top rents at One Greenwich Plaza coming in at $101, a 177.4 percent premium compared to the rest of the county.
What's so special about this 354,000 square foot Class A office and retail complex? Location, location, location (plus amenities, of course). Access is all but guaranteed here, with the Greenwich Train Station and I-95 directly adjacent to the property. On the property, a metro station offers 42-minute rides to Grand Central Station in Manhattan. Add in robust fiber optics, expansive views of Long Island Sound, and the promise of “blue-chip” corporate neighbors like AQR Capital and Lone Pine Capital, and the price tag becomes more understandable.
Pennsylvania Avenue, Washington DC
The 1.8-mile stretch section between the White House and the Capitol Building not only serves as the federal government's backyard—it's also home to a variety of prestigious law firms and lobbying groups, and offers some of the best views D.C. has to offer. At $80per square foot, the ability to rub shoulders with other players on the national stage comes at a 95 percent premium over the rest of the market.101 Constitution Avenue, which is the closest commercial building to the U.S. Capitol, commands the highest rents in the area, around $100 per square foot. And while there's more to the 10-story trophy office property than its rooftop terrace views, that—and the short, straight stroll up the hill to lawmakers—only add to its appeal.
Ocean Avenue, Los Angeles
Running parallel alongside the Pacific Coast, this picturesque street offers sweeping ocean views and easy beach access—for an average of $78.20 per square foot. TrueCar, Uber and ZipRecruiter are among the corporations filling up these desirable offices. Uber, for example, has a 10-year lease (initiated in 2014) for $40,000 along this stretch of road. At 1299 Ocean, you'll find the highest-cost lease ($97.20 per square foot). The 11-story, 205,000-square-foot, ocean-facing property was recently bid on at $290 million, and is home to the likes of global investment firm Wilshire Associates.
Boylston Street, BostonFinancial and legal service firms remain faithful tenants of this prestigious downtown Boston street. It's home to Bain & Company's corporate headquarters - the oldest and largest of its 55 offices. Ropes & Gray, 2018's Firm of the Year for mutual funds law, is also located nearby, at the 52-floor Prudential Tower on Boylston. In the summer of 2017, Kirkland & Ellis, which was the second highest grossing law firm in the U.S. in 2016, opened an office at 200 Clarendon Street, which has the street's highest rent at $71.50 per square foot.
Royal Palm Way, West Palm Beach
Otherwise known as Bankers Row, this tropical island setting is home to a high concentration of high net worth individuals, making it a prime spot for many financial institutions and wealth management companies. Rents tend to clock in around $61.80per square foot, a 96 percent premium on the rest of West Palm Beach. The most expensive office here, 230 Royal Palm Way, recently sold in a bundle with the neighboring building at 240, for $21.4 million. Given that it's a small island, skyscrapers are uncommon and buildings are relatively small, so JPMorgan Chase has its own Class A-office building all to itself—which is not uncommon.
Congress Avenue, AustinDowntown Austin's main street may still be the stomping ground for financiers and state-government officials, but a wave of new office, multifamily and retail developments has brought new energy and interest all along Congress Avenue. This year, in fact, marks the street's debut on the top 10 list, thanks to rents that now average $55.20 per square foot, and a 9.5 percent vacancy rate. Frost Bank Tower is the big ticket building here, with rents averaging $66.88 per square foot and a top-tier list of tenants that include Morgan Stanley and Ernst & Young.