Savills Effective Rent Index
SERI2015
Table Of Contents
Statistical Summary 1
Summary of Key Findings
2
National Benchmarks
5
Tenant Effective Rent Trends
11
Landlord Concession Trends
13
Landlord Effective Rent Trends
15
Total Rent Components 19
CBD Rent Trends
25
Suburban Rent Trends
35
Glossary
37
SERI Supplement
38
Methodology
Since 1995, the Savills Effective Rent Index (SERI) has been providing the real estate industry’s only comprehensive,
in-depth study of effective rental rate trends and the real cost of occupancy for tenants in the nation’s major Central
Business Districts (CBDs) and surrounding suburban markets. The SERI report tracks actual lease terms that reflect
negotiated rents and concessions, as well as the costs of maintaining a building that are partially passed through to
tenants – operating expenses, real estate taxes and electricity costs. The SERI Supplement highlights key economic
trends and market fundamentals that underpin each market’s performance.
Every year, Savills Studley’s Research team examines larger long-term direct deals signed in higher-caliber Class A
properties. Total (gross) rent is separated into its key components: net (or base) rent and building expenses (operating
expenses, real estate taxes and electricity costs). The Tenant Effective Rent Index (the cost of occupancy to the tenant)
is derived from total rent less the amortized value of concessions provided by the landlord. Finally, the Landlord Effective
Rent Index (the landlord’s bottom line) is calculated from total rent less costs incurred by the landlord, which include
expenses, concessions and commissions.
All statistics in this year’s SERI report are based on larger long-term leases completed during 2014 in existing or newly
constructed Class A buildings.
SERI2015
Total (Gross) Rent
LESS
Building Expenses
Operating Expenses
Real Estate Taxes
Tenant Electric
Net (Base) Rent
LESS
Amortized Concessions
Tenant Effective Rent
(Average cost of
occupancy for tenants)
LESS
Operating Expenses,
Real Estate Taxes,
Amortized Concessions
& Commissions
Landlord Effective Rent
(Landlord's remaining
balance)
All numbers based on negotiated larger long-term direct leases in higher-caliber Class A properties.
Statistical Summary
CBD Markets
Atlanta (ATL)
Boston (BOS)
Chicago (CHI)
Dallas (DAL)
Denver (DEN)
Houston (HOU)
Downtown Los Angeles (DTLA)
West Los Angeles (WLA)
Miami (MIA)
Manhattan - Downtown (DTNY)
Manhattan - Midtown (MTNY)
New Jersey (NJ)
Philadelphia (PHI)
Phoenix (PHO)
San Diego (SDO)
San Francisco (SAN FRAN)
Tampa Bay (TAM)
Washington, DC (WDC)
CBD Averages
Total (Gross)
Rent
Operating
Expenses
Building Expenses
Real Estate
Taxes
Leasing Costs
Tenant Electric
Net (Base) Rent
Concessions
Tenant
Effective
Landlord
Effective
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
28.90
52.10
40.80
26.40
36.25
44.18
35.85
41.20
39.45
47.59
76.90
27.25
30.23
30.38
30.40
59.80
27.25
64.68
31.33
57.23
45.45
27.05
38.55
49.04
39.92
45.45
40.55
51.65
82.70
29.95
34.74
31.32
31.10
68.85
28.00
65.59
7.15
12.00
8.60
8.00
6.75
6.50
10.50
10.10
7.95
11.50
13.55
8.50
8.45
7.46
7.20
12.10
5.65
9.00
7.83
12.50
8.75
8.25
6.85
6.68
10.75
9.75
8.10
11.75
13.90
8.75
8.76
7.69
7.25
12.45
5.65
9.25
3.75
10.50
8.15
2.65
2.70
5.76
3.30
3.75
5.05
8.95
14.80
3.15
3.98
3.72
4.55
5.10
3.00
12.58
4.00
11.25
8.40
2.80
2.80
6.81
3.57
4.10
5.15
9.15
15.20
3.25
2.36
3.84
4.65
5.45
3.00
12.76
9.20
1.50
2.10
1.75
2.50
1.80
2.30
2.05
2.35
2.95
2.64
3.30
1.80
2.00
1.74
2.90
3.35
2.50
2.85
2.66
1.50
2.23
1.80
2.50
1.90
2.30
2.10
2.60
3.05
2.65
3.35
1.95
1.97
1.79
2.95
3.45
2.50
2.83
2.72
16.50
27.50
22.30
13.25
25.00
29.62
20.00
25.00
23.50
24.50
45.25
13.80
15.80
17.46
15.75
39.25
16.10
40.25
18.00
31.25
26.50
13.50
27.00
33.25
23.50
29.00
24.25
28.10
50.25
16.00
21.65
18.00
16.25
47.50
16.85
40.75
88.38
101.65
90.60
50.00
58.14
64.81
72.00
70.00
80.00
92.83
128.28
60.00
54.60
84.00
55.00
69.93
45.46
136.21
92.00
100.80
99.00
50.00
61.00
66.00
83.00
74.00
80.00
101.00
138.00
62.50
56.77
80.00
54.00
72.00
43.25
132.35
16.70
38.07
28.30
19.50
27.28
35.24
25.91
31.54
28.41
34.78
59.20
18.97
22.70
18.79
21.54
48.53
20.98
45.88
18.63
43.34
31.79
20.15
29.14
39.93
28.47
35.24
29.51
37.71
63.66
21.33
26.90
20.28
22.40
57.25
22.03
47.33
1.84
13.44
9.67
7.24
16.77
20.46
10.59
15.94
15.32
12.31
28.20
5.41
8.57
5.71
8.55
29.57
9.71
21.52
2.62
17.45
12.76
7.44
18.43
23.64
12.44
19.46
16.11
14.61
31.67
7.23
13.82
6.80
9.23
37.58
10.68
21.55
55.99 60.38 10.75 11.01 8.97
33.61 37.45 97.10 102.06 42.13 45.78 19.90 22.86
Suburban Markets
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
Central Perimeter, GA
Cook County, IL
DuPage County, IL
Fairfield County, CT
Fort Lauderdale, FL
Long Island, NY
Main Line/Conshohocken, PA
North Dallas Corridor, TX
Northern Virginia
Orange County, CA
Raleigh/Durham, NC
Scottsdale/Tempe, AZ
Silicon Valley, CA
Southeast, CO
Waltham (Route 128), MA
West Loop/Galleria, TX
West Palm Beach, FL
Westchester, NY
22.88
26.05
25.15
39.75
33.88
30.84
32.20
27.20
36.85
27.65
33.40
32.58
40.45
32.90
36.63
39.20
33.10
34.95
26.10
26.85
25.50
39.13
34.99
31.24
32.45
29.25
41.27
28.89
35.75
33.58
43.05
35.53
41.25
39.93
32.70
35.45
5.95
7.75
7.15
11.10
8.75
8.15
7.50
8.35
6.00
6.75
4.60
8.87
8.40
3.80
7.40
6.90
10.40
9.75
6.05
7.90
7.20
11.15
8.95
8.20
7.50
8.45
6.25
7.09
4.60
9.14
8.65
3.90
7.75
7.00
10.45
9.85
2.20
4.50
2.00
4.40
3.70
6.85
3.00
3.75
2.90
1.85
1.90
2.42
3.95
3.85
6.00
3.20
4.30
6.35
2.30
4.55
2.05
4.48
3.80
6.90
3.00
3.80
3.05
1.90
2.00
2.49
4.05
3.88
6.30
3.30
4.35
6.35
1.50
1.50
1.75
2.75
2.93
1.34
2.70
2.60
2.95
2.05
1.90
1.89
3.10
1.75
1.63
2.10
2.90
3.00
1.50
1.50
1.75
2.75
2.99
1.34
2.70
2.60
2.97
2.05
1.90
1.95
3.10
1.75
1.75
2.13
2.90
3.00
13.23
12.30
14.25
21.50
18.50
14.50
19.00
12.50
25.00
17.00
25.00
19.40
25.00
23.50
21.60
27.00
15.50
15.85
16.25
12.90
14.50
20.75
19.25
14.80
19.25
14.40
29.00
17.85
27.25
20.00
27.25
26.00
25.45
27.50
15.00
16.25
50.16
68.00
61.00
39.75
47.50
31.00
30.00
44.00
82.99
56.13
35.00
82.00
47.00
42.50
64.15
47.80
61.00
47.00
52.58
70.00
60.00
39.13
48.50
30.00
30.00
44.00
92.00
60.00
32.84
80.00
45.00
45.00
62.13
46.00
60.00
50.00
15.96
16.67
16.73
33.26
27.33
27.91
28.06
21.13
25.40
19.90
15.39
21.26
33.20
16.39
27.78
29.15
36.18
28.11
18.85
17.19
17.22
32.23
28.30
28.55
28.31
23.18
28.57
20.61
16.25
22.54
36.11
17.07
32.68
32.08
36.92
27.30
4.76
2.92
6.08
15.68
13.02
11.11
15.79
7.37
14.46
10.15
7.77
7.94
20.32
7.79
12.67
17.79
21.48
10.17
7.23
3.24
6.47
14.55
13.63
11.62
16.03
9.13
16.98
10.41
8.46
8.82
22.84
8.34
16.92
20.42
22.12
9.28
Suburban Averages
1
32.59 34.05
7.69
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
7.78
3.73
3.81
2.24
2.26
18.92 20.20 52.05
52.62
24.43 25.78 11.51 12.58
SERI2015
Summary of Key Findings
Effective Rent Rises in All Markets, Concessions Stay Near Record Levels
Tenants paid more to lease premium Class A space in major U.S. CBDs during 2014. Tenant effective rent increased in all markets and posted
its largest year-on-year gain since 2011, jumping by 8.7% from $42.13 to $45.78. The average amortized value of concession packages
($14.60) rose by 5.3%, but ultimately did not keep pace with net rent, which spiked by 11.4% from $33.61 to $37.45, as well as total rent,
which increased by 7.8% to $60.38. Owners in the tightest and most competitive markets such as San Francisco and Houston pulled back a
bit on concessions. Landlord effective rent rose by 14.9% to $22.86, the first time since 2008 that it exceeded $20.00.
KEY CBD FINDINGS 2013
2014
2014
(Weighted (Weighted change
Average) Average)
%
2013
2014
Unweighted Unweighted
Average
Average
COMMENTS
Total (Gross) Rent
$55.99
$60.38
7.8%
$41.07
$44.37
Total rent increased in every market as building expenses rose slightly in most areas and net rent increased everywhere.
Operating Expenses
$10.75
$11.01
2.4%
$8.84
$9.05
The cost of operating a premium Class A property pushed a bit higher in 2014.
Real Estate Taxes
$8.97
$9.20
2.6%
$5.70
$5.84
Property taxes inched higher in most markets.
Tenant Electric
$2.66
$2.72
2.1%
$2.41
$2.46
Net Rent
$33.61
$37.45
11.4%
$24.12
$27.02
Amortized Concessions
$13.86
$14.60
5.3%
$10.73
$11.15
Tenant Effective Rent Index
$42.13
$45.78
8.7%
$30.34
$33.22
Landlord Effective Rent Index
$19.90
$22.86
14.9%
$13.85
$16.20
Tenant electric costs continued to increase at a moderate pace.
The net rent index registered an increase of more than 10.0%, rising for the fourth straight year.
The value of concessions rose slightly, but did not keep pace with the growth in rents.
Tenants faced higher effective rents in all markets during 2014, with particularly sharp increases exceeding 10% in seven markets.
Landlord effective rent posted its fourth year of growth, and its first double‐digit jump since 2011. S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
2
Key Findings
Total (Gross) Rent
$60.38 (+7.8%)
LESS:
LESS:
LESS:
Building Expenses ($22.93)
Amortized Concessions*
$14.60 (+5.3%)
Op. Ex., Taxes, Amortized
Concessions &
Commissions ($37.52)
Net (Base) Rent
$37.45 (+11.4%)
Tenant Effective Rent
$45.78 (+8.7%)
Landlord Effective Rent
$22.86 (+14.9%)
Op. Ex. $11.01 (+2.4%)
Taxes $9.20 (+2.6%)
Tenant Electric $2.72 (+2.1%)
*Concessions are amortized over the average lease term in the market
3
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
National Benchmarks
SERI2015
Hiring Intensifies, Supporting Steady Demand for Office Space
Job growth accelerates: Private employers added 2.9 million jobs during 2014, and growth exceeded 200,000 jobs
per month – the strongest stretch of hiring since 1999. Office-using sectors ended 2014 with 1.0 million jobs more
than at the pre-recession peak. For the first time since 2007, positive news about job growth, improving household
consumption and corporate profits dominated headlines as crises such as Eurodebt, the fiscal cliff and taper tantrum
dissipated.
Leasing rises in lagging markets: The intensity of growth remained uneven but markets that experienced weaker
leasing in prior years finally registered significant net absorption. A key difference in 2014 was the turnaround in
markets such as Downtown Los Angeles and Chicago. These CBDs were limping along in 2012 and 2013, but
during 2014 stronger demand started to make a dent in availability. Class A properties in Northern New Jersey also
registered a burst of activity. Effective rent in turn posted its first increase in quite some time.
Tech centers maintain frenetic pace: Demand has not abated in tech-fueled markets such as Silicon Valley and San
Francisco, as well as in pockets of Denver, Los Angeles and Manhattan. Low-cost, high-growth markets such as
Atlanta, Tampa Bay, Phoenix and Denver replicated Dallas/Fort Worth’s success – winning site selection battles and
drawing employers from higher-cost markets.
Sales support rental rate growth: Finally, strong investment sales influenced how leases were structured in many
markets. Landlords considering the sale of a building were less willing to budge on taking rent but were flexible in
terms of concessions, particularly with creditworthy tenants who committed to long-term leases.
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
4
National Benchmarks
Total Rent Pushes Higher
Total Rent Components
Total or gross rent (first year taking rent)
increased for the fourth year in a row,
jumping by 7.8% from $55.99 to $60.38 – its
sharpest year-on-year growth since 2011.
Real Estate
Taxes
Electricity
$60
$50
$40
Total rent rose primarily due to an 11.4%
spike in net rent from $33.61 to $37.45.
Building expenses also continued to rise,
though, contributing to the increase in total
rent. Operating expenses ticked up by 2.4%
from $10.75 to $11.01. Real estate taxes
increased by 2.6% from $8.97 to $9.20.
Tenant electric registered a 2.1% increase
from $2.66 to $2.72.
$30
$20
$10
$0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Net Rent
$27.21
$29.77
$35.18
$42.50
$39.94
$29.27
$26.97
$31.80
$32.03
$33.61
$37.45
Operating Expenses
$8.50
$8.61
$8.90
$9.56
$9.85
$10.00
$10.20
$10.55
$10.74
$10.75
$11.01
Real Estate Taxes
$7.56
$8.21
$8.38
$8.30
$8.54
$8.85
$8.89
$8.99
$8.95
$8.97
$9.20
Electricity
$2.09
$2.30
$2.41
$2.46
$2.52
$2.56
$2.60
$2.65
$2.65
$2.66
$2.72
$48.89
$54.87
$62.82
$60.86
$50.69
$48.66
Total Rent
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Operating
Expenses
$70
Total gross rent consists of four components:
net (or base) rent and three building expense
components – operating expense, real estate
taxes and tenant electricity.
5
Net Rent
$45.36
$53.98
$54.37
$55.99
$60.38
SERI2015
Value of Concessions Falls
Relative to Rents
Tenants continued to negotiate
generous concession packages. Many
landlords remained eager to secure
long-term lease commitments with
creditworthy tenants. They consequently
structured leases to include lengthy
free rent periods and generous tenant
improvement allowances.
Elevated concessions in three of the
largest markets – Manhattan (Midtown)
($138.00), Washington, DC ($132.35)
and Chicago ($99.00) pushed the
weighted national average ($102.06)
higher.
Although the value of concessions was
stable or rose in most markets, it did not
keep pace with the growth in rents. As
a percentage of total rent ($60.38), the
average value of amortized concession
packages ($14.60) declined from
23.9% in 2013 to 23.3% – well above
pre-recession levels but a decrease
nonetheless.
Landlord Concessions: 2004-2014
$120
30.0%
$100
25.0%
$80
20.0%
$60
15.0%
$40
10.0%
$20
5.0%
$0
Value of Concessions
Amort. Concessions/Rent
2004
$60.07
19.9%
2005
$59.31
18.2%
2006
$58.33
15.9%
2007
$63.61
14.1%
2008
$75.07
17.2%
2009
$93.56
25.8%
2010
$88.33
25.3%
2011
$94.10
24.4%
2012
$92.55
24.0%
2013
$97.10
24.8%
2014
$102.06
24.2%
0.0%
Additionally, higher relocation and
construction costs in many markets
further eroded the value of tenant
improvement allowances.
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
6
National Benchmarks
Expenses Account for Smaller Share of Total Rent
Total (or gross) rent consists of two main components: net (or base) rent and building expenses (operating expenses, real estate taxes and
tenant electricity). As a percentage of total rent, net rent jumped from 60.0% in 2013 to 62.0% in 2014. Building expenses’ share dropped from
40.0% to 38.0% and was well below its 42.9% share in 2009.
Net
Rent
Total Rent Components
Building
Expenses
42.9%
Building
Expenses
38.0%
Building
Expenses
42.9%
5.0%
18.8%
15.2%
18.8%
57.1%
7
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
57.1%
4.6%
15.2%
2014 2014
18.2%
19.1%
Real Estate
Taxes
Building
Expenses
38.0%
4.6%
5.0%
2009 2009
19.1%
Operating
Expenses
18.2%
62.0%
62.0%
Electricity
SERI2015
Operating Margins Return to
Pre-Recession Norms
The net (base) rent/total rent ratio
measures how much of net rent is
flowing to building expenses (prior
to deducting concessions and
commissions). Net rent accounted
for 62.0% of total rent – meaning that
38.0% of total rent was diverted to
operating expenses, real estate taxes
and electricity.
Net rent’s share has returned to the
levels seen at the start of the last
expansion cycle during 2005 and 2006.
Net Rent/Total Rent Ratio: 2004-2014
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Building Expenses Share
Net Rent Share
2004
40.0%
60.0%
2005
39.1%
60.9%
2006
35.9%
64.1%
2007
32.3%
67.7%
2008
34.4%
65.6%
2009
42.9%
57.1%
2010
45.0%
55.0%
2011
41.3%
58.9%
2012
41.1%
58.9%
2013
40.0%
60.0%
2014
38.0%
62.0%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
8
National Benchmarks
Effective Rent Increases
Tenant
Effective
National Effective Rent Comparison
Net rent spiked by 11.4% in 2014, its largest
increase since 2011 and more than twice the
5.3% growth in the average amortized value
of concession packages.
Consequently, tenant occupancy costs (the
national Tenant Effective Rent Index) rose by
8.7% from $42.13 to $45.78.
Additionally, the national Landlord Effective
Rent Index jumped from $19.90 to $22.86,
a 14.9% spike. This was the sharpest yearon-year jump since 2011, when the economy
was finally coming out of recession.
Landlord
Effective
$60
$50
$40
$30
$20
$10
$0
Tenant Effective Rent
Landlord Effective Rent
9
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
2004
$36.35
$18.06
2005
$40.00
$20.79
2006
$46.14
$26.39
2007
$53.96
$32.90
2008
$50.36
$28.78
2009
$37.61
$16.09
2010
$36.35
$14.72
2011
$40.80
$18.65
2012
$41.33
$19.11
2013
$42.13
$19.90
2014
$45.78
$22.86
SERI2015
Occupancy Costs Rise in All
Markets
Tenant Effective Rent Market Comparison
Tenants faced higher occupancy costs
in all major U.S. CBDs during 2014.
Manhattan (Midtown), with an average
tenant effective rent of $63.66, remained
the most expensive market, followed
once again by San Francisco ($57.25)
and Washington, DC ($47.33). Of note,
the 18.0% increase in San Francisco
was second only to the 18.5% jump in
Philadelphia and was nearly six times
the 3.2% up-tick in Washington, DC. The
nation’s capital, which posted the most
consistent rental rate growth between
2000 and 2010, is now registering
inflationary rental rate appreciation and is
mirroring the slower pace of markets such
as Miami (+3.9%) and Dallas (+3.3%).
Houston pushed up to being the fourth
most expensive market with a 13.3%
annual increase in tenant effective rent
to $39.93. The sharp fall in oil and gas
prices, coupled with steadier rental
growth in Manhattan (Downtown) and
West Los Angeles, could push Houston
lower on the list in 2015.
2013
2014
$65
$60
$55
$50
$45
$40
Unweighted Average:
$33.22 (+9.5%)
$35
$30
$25
$20
$15
$10
$5
$0
MIA
28.41
DEN
27.28
DTLA
25.91
63.66 57.25 47.33 39.93 37.71 35.24 31.79 29.51
Y-o-Y Change 7.5% 18.0% 3.2% 13.3% 8.4% 11.7% 12.3% 3.9%
29.14
6.8%
2013
2014
MTNY SFO
59.20 48.53
WDC
45.88
HOU DTNY
35.24 34.78
WLA
31.54
CHI
28.30
PHI
22.70
SDO
21.54
TAM
20.98
NNJ
18.97
DAL
19.50
28.47
26.90
22.40
9.8%
18.5%
4.0%
22.03
21.33
20.15
18.63
5.0%
12.4%
3.3%
11.6%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
ATL
16.70
10
Tenant Effective Rent Trends
Growth of 5.0% or More in
Two-Thirds of Markets
During 2013, tenant effective rent fell in
three CBDs – Dallas, Washington, DC
and Downtown Los Angeles. Effective
rent rose in all markets during 2014,
although five registered growth of 5.0% or
less. Weaker rental rate growth in Dallas
(+3.3%) and San Diego (+4.0%) is not
reflective of broader market conditions.
Businesses in both markets continue to
show a clear preference for suburban
locations. CBD office buildings are
struggling to compete with suburban
properties due to outdated building stock,
limited parking and retail/residential
product that pales in comparison with that
in newer suburban locations. In contrast,
rental rate growth in Washington, DC
(+3.2%) and Miami (+3.9%) is reflective of
softer demand across the entire market.
Seven markets posted double-digit
effective rent growth in 2014. Philadelphia
(+18.5%) had a burst of activity in the very
upper echelon of its Class A properties,
and rents were coming off a low base.
Similarly, in New Jersey, rents are
rebounding from an average that was well
below historical norms.
11
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Tenant Effective Rent: Year-on-Year Change by Market
Philadelphia
18.5%
San Francisco
18.0%
Houston
13.3%
New Jersey
12.4%
Chicago
12.3%
West LA
11.7%
Atlanta
11.6%
Downtown LA
9.8%
Manhattan (DT)
8.4%
Manhattan (MT)
7.5%
Denver
6.8%
Tampa Bay
5.0%
San Diego
4.0%
Miami
3.9%
Dallas
3.3%
Washington, DC
3.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
SERI2015
Effective Rent Still Below
Peak in Most Markets
Houston, which did not register as
sharp a run-up in rents during the
last expansion, is now 46.3% above
its prior peak. Tenant effective rent
jumped by 6.8% in Denver during 2014,
pushing it 16.7% above its prior peak.
Three other markets – Philadelphia
(+14.0%), San Francisco (+6.5%) and
Downtown Los Angeles (+5.2%) – are
now more than 5.0% above their prior
peak.
Occupancy costs in Manhattan
(Midtown) remained more than
30.0% below their prior peak, as did
occupancy costs in Dallas (-30.6%) and
San Diego (-41.2%).
Tenant Effective Rent Trends: Percentage Above/Below Prior Peak
Houston
46.3%
Denver
16.7%
Philadelphia
14.0%
San Francisco
6.5%
Downtown Los Angeles
5.2%
Chicago
2.3%
Tampa Bay
0.5%
New Jersey (2006)
-7.7%
-13.6%
West Los Angeles (2008)
Washington, DC
-14.7%
Atlanta (2006)
-19.5%
Miami
-24.5%
Manhattan (Downtown)
-25.4%
Dallas (2008)
-30.6%
Manhattan (Midtown)
-31.5%
San Diego
-41.2%
-50% -40% -30% -20% -10%
0%
10%
20%
30%
40%
50%
*Unless otherwise indicated, last market peak occurred in 2007
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
12
Landlord Concession Trends
Value of Concession Packages
Up in Most Markets
Landlord Concessions: Market Comparison
The value of concessions rose in 11
markets, fell in three and was unchanged
in two. The unweighted national average
rose by 4.0% to $79.05. Downtown Los
Angeles posted a 15.3% increase to
$83.00 as landlords aggressively pursued
tenants in an effort to fill big blocks of
vacant space. No other CBDs recorded
increases exceeding 10.0% but both
markets in Manhattan – Midtown and
Downtown – registered hefty jumps of
7.6% to $138.00 and 8.8% to $101.00.
Similarly, Chicago’s concessions rose by
9.3% to $99.00.
2014
$140
$120
$100
Unweighted Average:
$79.05 (+4.0%)
$80
$60
Concessions rose in a few other more
competitive markets such as San
Francisco (+3.0% to $72.00) and Houston
(+1.8% to $66.00) due primarily to spiking
rents that in turn boosted the value of free
rent periods.
$40
$20
$0
MTNY
WDC
DTNY
CHI
$128.28 $136.21 $92.83 $90.60
2014
$138.00 $132.35 $101.00 $99.00
Y-o-Y Change 7.6%
-2.8%
8.8%
9.3%
2013
13
2013
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
ATL
$88.38
$92.00
4.1%
DTLA
$72.00
$83.00
15.3%
MIA
$80.00
$80.00
0.0%
WLA
$70.00
$74.00
5.7%
SFO
$69.93
$72.00
3.0%
HOU
$64.81
$66.00
1.8%
NJ
$60.00
$62.50
4.2%
DEN
$58.14
$61.00
4.9%
PHI
$54.60
$56.77
4.0%
SDO
$55.00
$54.00
-1.8%
DAL
$50.00
$50.00
0.0%
TAM
$45.46
$43.25
-4.9%
SERI2015
Concessions Not Keeping
Pace with Rents
The ratio of amortized concessions
to total rent (concessions/rent ratio)
is a way of comparing the value of
concessions from market to market.
In most cases, the higher the ratio the
more likely it is that conditions favor
the tenant. The ratio also provides
a measure of leasing costs – as it
increases, it indicates that the value of
concessions is rising more than rents.
Downtown Los Angeles was the only
market with a significant increase in
its concessions/rent ratio, which rose
from 27.7% to 28.7%. The ratio was
flat in Manhattan – both Downtown and
Midtown – but fell in all other markets.
Amortized Concessions as Percentage of Total Rent
45%
40%
35%
30%
25%
20%
15%
10%
Atlanta’s concessions/rent ratio
(40.5%) was once again well above the
national average of 23.3%. Chicago
(30.1%) was the only other market with
a ratio exceeding 30.0%. In contrast,
Houston (18.6%) and San Francisco
(16.8%) were the only two markets
with ratios of less than 20.0%.
5%
0%
ATL
CHI
NJ
DTLA
SDO
WDC
MIA
DTNY
DAL
DEN
MTNY
PHI
WLA
TAM
HOU
SFO
2013
42.2%
30.6%
30.4%
27.7%
29.2%
29.1%
28.0%
26.9%
26.1%
24.7%
23.0%
24.9%
23.4%
23.0%
20.2%
18.8%
2014
40.5%
30.1%
28.8%
28.7%
28.0%
27.8%
27.2%
27.0%
25.5%
24.4%
23.0%
22.6%
22.5%
21.3%
18.6%
16.8%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
14
Landlord Effective Rent Trends
Landlords Capturing Bigger Bottom Line in Most Markets
Landlord effective rent rose by 14.9% in 2014, more than four times the 3.3% average annual gain in the
prior two years. Competition for space in San Francisco, Silicon Valley, West Los Angeles, Houston and Denver’s CBD
was sustained for most of 2014 but there were some signs of a let-up late in the year in Houston. In 2013, effective
rent rose by only 4.1%, and was dampened a bit by sluggish trends in the biggest markets – Manhattan (Midtown),
Downtown Los Angeles, Washington, DC – and restrained growth in Chicago. In 2014, Downtown Los Angeles and
Chicago saw further reductions in availability and stronger rental rate growth. Leasing in Manhattan (Midtown) and
Washington, DC remained shaky, but landlords achieved moderately higher rents, often by offsetting rent hikes with
padded concession packages.
Additionally, rental rate growth in several of the lowest-cost markets such as Tampa Bay and Atlanta was held in check
during 2012 and 2013 due to elevated availability rates. Nearly three years of steady leasing in the Buckhead area of
Atlanta have made a substantial dent in excess space. Tenants in Buckhead and Tampa Bay’s Westshore are having
more difficulty in locating bigger and mid-sized quality blocks, supporting rental rate growth.
Chicago posted its biggest increase in effective rent in several years as suburban companies relocating Downtown
supplemented moderate expansion among existing firms. Miami, which is still a step behind in terms of how far along it
is in the recovery, witnessed steady demand from law firms and international banks, further depleting options in Brickell
and Coral Gables. Even Northern New Jersey saw its first material rental rate appreciation in several years as big blocks
along the Hudson Waterfront were filled. In both Chicago and New Jersey, though, some of the CBD’s activity came at
the expense of suburban areas as more businesses leased center-city space as part of their effort to recruit younger
employees.
15
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
SERI2015
Double-Digit Growth in
11 Markets
2013
Landlord Effective Rent Market Comparison
Landlord effective rent rose by 14.9%
in 2014, the largest year-on-year
jump since 2011, as sharp rental rate
appreciation in San Francisco (+27.1%),
West Los Angeles (+22.1%) and
Houston (+15.5%) was supplemented by
markets such as Philadelphia (+61.3%),
Atlanta (+42.4%), Northern New Jersey
(+33.6%), Chicago (+32.0%) and
Downtown Los Angeles (+17.5%) that
registered their first significant rental rate
growth during this recovery cycle.
2014
$40
$35
$30
$25
Unweighted Average:
$15.36 (+11.2%)
$20
$15
Dallas (+2.8% to $7.24) and Washington,
DC (+0.1% to $21.55) were the only two
markets to record an increase of less
than 5.0% in landlord effective rent.
$10
$5
$0
SFO
2013
$29.57
2014
$37.58
Y-o-Y Change 27.1%
MTNY
$28.20
$31.67
12.3%
HOU
$20.46
$23.64
15.5%
WDC
$21.52
$21.55
0.1%
WLA
$15.94
$19.46
22.1%
DEN
$16.77
$18.43
9.9%
MIA
$15.32
$16.11
5.2%
DTNY
$12.31
$14.61
18.7%
PHI
$8.57
$13.82
61.3%
CHI
$9.67
$12.76
32.0%
DTLA
$10.59
$12.44
17.5%
TAM
$9.71
$10.68
10.0%
SDO
$8.55
$9.23
8.0%
DAL
$7.24
$7.44
2.8%
NNJ
$5.41
$7.23
33.6%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
ATL
$1.84
$2.62
42.4%
16
Landlord Effective Rent Trends
Five Markets Now Above Their
Pre-Recession Peak
Landlord effective rent in three markets
has pushed more than 10.0% above
its pre-recession peak: Philadelphia
(+28.2%), Denver (+23.3%) and Houston
(+17.4%).
Landlord effective rent rose in all markets
during 2014, but nevertheless 11 markets
were below their prior peak and more than
half remained 20% below peak.
Five markets were 50.0% or more below
their prior peak: Manhattan – both
Downtown and Midtown – Dallas, San
Diego and Atlanta.
Landlord Effective Rent Trends: Percentage Above/Below Prior Peak
Philadelphia
28.2%
Denver
23.3%
Houston (2008)
17.4%
Chicago
9.4%
San Francisco
3.7%
Downtown Los Angeles
-2.6%
Tampa Bay (2006)
-7.0%
West Los Angeles
-17.4%
New Jersey (2006)
-29.5%
Washington, DC
-32.6%
Miami
-35.5%
Manhattan (Downtown)
-50.0%
Manhattan (Midtown)
-51.0%
Dallas (2008)
-55.6%
San Diego
Atlanta (2006)
-62.4%
-74.3%
-75%
-55%
-35%
-15%
5%
25%
*Unless otherwise indicated, prior market peak occurred in 2007
17
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
45%
SERI2015
Landlord’s Bottom Line Nearly
One-Third Below 2007 Peak
Landlord effective rent has increased
every year since hitting its low of $14.72
in 2010. Nevertheless, in 2014 it was
30.5% below its peak of $32.90 in 2007.
During the last recovery landlord
effective rent nearly doubled between
2003 and 2007, rising from $17.64 to
$32.90. In this cycle it has risen less
sharply, jumping from $14.72 to $22.86
since 2009.
Additionally, although concessions
declined in most markets, they are still
cutting very deeply into landlord effective
rent. Nationally, average amortized
concessions totaled $14.60, a new
record.
Landlord Cost Components
$70
Landlord Effective Rent
Electricity
$60
$9.60
$8.79
$50
$8.98
$40
$30
$9.15
$7.56
$8.50
$20
$10
$2.09
$18.06
$8.21
$8.61
$8.38
$8.90
Operating Expenses
$14.59
$13.71
$13.14 $12.92
$8.30
$8.54
$13.18
$9.56
$2.46
$9.85
$2.52
$2.41
$8.85
$12.25
$8.99
$26.39
$28.78
$2.56
$8.95
$8.97
$8.89
$10.00 $10.20
$32.90
Amortized Concessions
$11.17
$2.30
$20.79
Real Estate Taxes
$10.75
$10.55 $10.74
$2.65
$2.65
$2.66
$9.20
$11.00
$2.72
$2.60
$19.11 $19.90
$16.09 $14.72 $18.65
$22.86
$0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
18
Total Rent Components By Market
Higher Net Rent/Total Rent
Ratio in Many Markets
In 2014, all markets except for Dallas
posted higher net rent. The ratio of
net rent to total rent exceeded 60.0%
in eight markets (up from six in 2013).
Denver (70.0%) had the highest net
rent/total rent ratio followed closely by
San Francisco (69.0%) and Houston
(67.8%).
Net Rent/Total Rent Ratio by Market
2013
2014
45%
40%
35%
30%
The net rent/total rent ratio, was much
lower in Dallas (49.9%) and San Diego
(52.3%) as CBD product in these
markets struggled to compete with
suburban properties.
25%
20%
15%
10%
5%
0%
19
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
ATL
CHI
NJ
DTLA
SDO
WDC
MIA
DTNY
DAL
DEN
MTNY
PHI
WLA
TAM
HOU
SFO
2013
42.2%
30.6%
30.4%
27.7%
29.2%
29.1%
28.0%
26.9%
26.1%
24.7%
23.0%
24.9%
23.4%
23.0%
20.2%
18.8%
2014
40.5%
30.1%
28.8%
28.7%
28.0%
27.8%
27.2%
27.0%
25.5%
24.4%
23.0%
22.6%
22.5%
21.3%
18.6%
16.8%
SERI2015
All Markets Post Higher
Total Rent
The national Total Rent Index rose by
7.8%, from $55.99 to $60.38, with
increases in all markets. The unweighted
national average rose by 8.0% to $44.37.
Total (Gross) Rent Market Comparison
2013
2014
$85
$80
$75
Total rent in the most expensive market,
Manhattan (Midtown), posted a slightly
greater increase than in 2013, rising by
7.5% to $82.70. Six markets registered
growth exceeding 10.0%, led by San
Francisco (+15.1%) and Philadelphia
(+14.9%).
Five markets recorded increases of
less than 5.0%. Growth was weakest
in Washington, DC where total rent
inched up by 1.4% to $65.59. Total rent
rose very slightly in San Diego (+2.3%)
and Dallas (+2.5%), reflecting markets
in which tenants continue to prefer
suburban office product to CBD space.
$70
$65
$60
$55
Unweighted Average:
$44.37 (+8.0%)
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
MTNY
SFO
WDC DTNY
HOU
WLA
CHI
MIA
2013
$76.90 $59.80 $64.68 $47.59 $44.18 $41.20 $40.80 $39.45
2014
$82.70 $68.85 $65.59 $51.65 $49.04 $45.45 $45.45 $40.55
Y-o-Y Change 7.5% 15.1% 1.4%
8.5% 11.0% 10.3% 11.4% 2.8%
DTLA
DEN
PHI
ATL
$35.85 $36.25 $30.23 $28.90
$39.92 $38.55 $34.74 $31.33
11.4% 6.3% 14.9% 8.4%
SDO
NNJ
TAM
DAL
$30.40 $27.25 $27.25 $26.40
$31.10 $29.95 $28.00 $27.05
2.3%
9.9%
2.8%
2.5%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
20
Total Rent Components By Market
Moderate Growth in Operating
Expenses
The national Operating Expense Index rose
by 2.4% to $11.01 in 2014. The unweighted
national average posted a 2.3% jump to
$9.05.
Operating expenses were flat in San Diego
and Tampa Bay, and fell in West Los
Angeles. Operating expenses rose in all
other markets.
Operating Expense Comparison
2014
$14
$12
$10
Operating expenses in four markets
exceeded $10.00 during 2014, while three
markets had operating expenses of less
than $7.00.
2013
Unweighted Average:
$9.05 (+2.3%)
$8
$6
$4
$2
$0
MTNY SFO DTNY DTLA WLA WDC
2013 13.55 12.10 11.50 10.50 10.10 9.00
2014 13.90 12.45 11.75 10.75 9.75 9.25
21
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
PHI
8.45
8.76
CHI
8.60
8.75
NJ
8.50
8.75
DAL
8.00
8.25
MIA
7.95
8.10
ATL
7.15
7.83
SDO
7.20
7.25
DEN
6.75
6.85
HOU
6.50
6.68
TAM
5.65
5.65
SERI2015
Taxes Continue Ascent
Real Estate Tax Comparison
The national Real Estate Tax Index
rose at a slightly slower pace in 2014,
increasing by 2.6% to $9.20. The
unweighted national average increased
by 2.4% to $5.84.
Philadelphia, which changed the way it
assesses commercial property, posted
the only decline in real estate taxes.
Philadelphia’s average tax rate fell from
an already below-average $3.98 to
$2.36 and is now the lowest tax for a
major CBD. Washington, DC is making
changes to its tax assessment but the
impact on properties varies widely.
Most markets registered slight increases
in taxes of between 0.5% and 2.0%
as rents and occupancy have slowly
improved in the highest-caliber
properties. Strong demand for stabilized
Class A assets in major CBDs has
pushed pricing higher, and will continue
to boost valuations and taxes in markets
such as Manhattan, West Los Angeles
and Denver.
2014
2013
$16
$12
$8
Unweighted Average:
$5.84 (+2.4%)
$4
$0
MTNY WDC DTNY
2013 14.80 12.58 8.95
2014 15.20 12.76 9.15
CHI
8.15
8.40
HOU
5.76
6.81
SFO
5.10
5.45
MIA
5.05
5.15
SDO
4.55
4.65
WLA
3.75
4.10
ATL
3.75
4.00
DTLA
3.30
3.57
NJ
3.15
3.25
TAM
3.00
3.00
DAL
2.65
2.80
DEN
2.70
2.80
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
PHI
3.98
2.36
22
Total Rent Components By Market
Minor Increase in Tenant
Electricity
Tenant electricity costs rose very slightly
in 2014, increasing by 2.1% to $2.72. The
unweighted national average increased
by 2.0% to $2.46. Tenant electricity was
unchanged in four markets, fell in two and
rose in all others.
West Los Angeles (up by 10.6% to $2.60)
and New Jersey (up by 8.3% to $1.95)
posted the largest year-on-year jumps in
tenant electricity costs during 2014.
2013
Electricity Cost Comparison
2014
$3.50
$3.00
Unweighted Average:
$2.46 (+2.0%)
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
SFO MTNY MIA
2013 3.35 3.30 2.95
2014 3.45 3.35 3.05
23
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
SDO
2.90
2.95
WDC DTNY WLA
2.85 2.64 2.35
2.83 2.65 2.60
DAL
2.50
2.50
TAM
2.50
2.50
HOU DTLA
2.30 2.05
2.30 2.10
PHI
2.00
1.97
NJ
1.80
1.95
DEN
1.80
1.90
CHI
1.75
1.80
ATL
1.50
1.50
SERI2015
Net Rent Up by
More Than 10.0%
Net Rent Comparison
In 2014, the national Net Rent Index
increased by 11.4%, rising from $33.61 to
$37.45. Net rent rose in all markets. The
unweighted national average jumped by
12.0% to $27.02.
2013
2014
$55
$50
$45
Philadelphia (+37.0% to $21.65) and
Downtown Los Angeles (+17.5% to $23.50)
both posted sharp increases in net rent but
this was the first time in several years that
rates had shown significant growth.
$40
$35
Unweighted Average:
$27.02 (+12.0%)
$30
In contrast, San Francisco (+21.0% to
$47.50), West Los Angeles (+16.0% to
$29.00) and Houston (+12.3% to $33.25)
are several years into their expansion cycle.
Houston’s growth could be cut short in
2015 due to the turbulence in oil and gas
markets. San Francisco and West Los
Angeles show no signs of slowing rental
rate growth in the short term.
$25
$20
$15
$10
$5
$0
MTNY
SFO
WDC
HOU
WLA
DTNY
DEN
CHI
MIA
DTLA
PHI
ATL
TAM
SDO
NNJ
DAL
2013
45.25
39.25
40.25
29.62
25.00
24.50
25.00
22.30
23.50
20.00
15.80
16.50
16.10
15.75
13.80
13.25
2014
50.25
47.50
40.75
33.25
29.00
28.10
27.00
26.50
24.25
23.50
21.65
18.00
16.85
16.25
16.00
13.50
Y-o-Y Change 11.0% 21.0%
1.2%
12.3% 16.0% 14.7%
8.0%
18.8%
3.2%
17.5%
37.0%
9.1%
4.7%
3.2%
15.9%
1.9%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
24
CBD Rent Trends
Atlanta
Total rent rose for the second straight year,
increasing by 8.4% from $28.90 to $31.33.
Net rent jumped by 9.1% from $16.50 to
$18.00. Operating expenses (+9.5%) and
real estate taxes (+6.7%) posted sharper
increases than in prior years. Landlords
continued to extend generous concession
packages, which rose by 4.1% to $92.00,
but relative to total rent, the value of
concessions fell. Tenant effective rent
increased by 11.6% to $18.63. Landlord
effective rent spiked from $1.84 to $2.62
– a 42.5% jump, but a fraction of the prerecession peak of $10.19 attained in 2006.
Chicago
Total rent increased for the second year in a
row, pushing 11.4% higher to a new peak of
$45.45. Net rent rose by 18.8% from $22.30
to $26.50. Operating expenses (+1.7%), real
estate taxes (+3.1%) and tenant electricity
(+2.9%) all registered annual growth.
Concessions rose along with the base
rent increase, jumping by 9.3% to $99.00.
Tenant effective rent increased by 12.3%
to $31.79 and landlord effective rent rose
by 32.0% to $12.76, just above the peak of
$11.66 in 2007.
25
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Total
Rent
Atlanta Rent Trends
$35
27.74
$30
$25
$20
24.04
21.53
23.14
29.90
20.93
18.24
31.09
18.83
9.76
29.62
16.93
14.44
28.44
15.60
28.90
16.70
5.01
2005
2006
2007
2008
2009
3.13
2010
1.01
1.84
2.62
2011
2012
2013
2014
Tenant
Effective
$50
35.35
36.10
38.59
$35
$25
Landlord
Effective
45.45
$45
$30
18.63
0.72
Total
Rent
Chicago Rent Trends
$40
31.33
7.37
2.15
2004
30.48
Landlord
Effective
10.19
7.05
$5
$0
30.53
16.04
$15
$10
29.35
Tenant
Effective
42.11
39.00
38.15
39.78
41.00
39.82
31.79
31.07
24.31
23.68
26.58
26.17
40.80
23.66
25.57
25.82
26.71
28.30
$20
11.66
$15
$10
6.65
5.12
7.21
7.12
$5
$0
2004
2005
2006
2007
2008
4.09
2009
5.99
6.10
6.96
2010
2011
2012
9.67
2013
12.76
2014
SERI2015
Dallas
Total rent rose for the first time since 2008,
increasing by 2.5% to $27.05. Net rent
inched up by 1.9%, from $13.25 to $13.50.
Operating expenses (+3.1%) and real estate
taxes (+5.7%) both rose but tenant electricity
was unchanged. Concession packages also
stayed level in 2014, remaining at $50.00,
but fell as a percentage of total rent. Tenant
effective rent increased by 3.3% to $20.15,
but was nearly 40.0% below its 2008 peak.
Landlord effective rent rose by 2.8%, from
$7.24 to $7.44.
$40
$30
Total rent rose for the fourth year in a row,
increasing by 6.3% to $38.55. Net rent
increased by 8.0%, from $25.00 to $27.00.
Operating expenses (+1.5%), real estate
taxes (+3.7%) and tenant electricity (+5.6%)
maintained their steady growth. Concessions
jumped by 4.9% to $61.00, but were down
slightly relative to total rent. Tenant effective
rent increased by 6.8% to $29.14 – its
highest mark on record. Landlord effective
rent pushed 9.9% higher to $18.43, also a
new peak.
31.69
26.00
26.50
Landlord
Effective
28.53
27.76
21.47
26.53
26.40
27.05
21.14
20.18
19.50
20.15
9.33
8.92
8.03
7.24
7.44
2010
2011
2012
2013
2014
29.03
26.17
$20
$10
29.38
27.52
$25
$15
Tenant
Effective
35.10
$35
19.93
20.43
21.72
8.54
8.79
8.74
2004
2005
2006
14.79
16.74
22.30
10.10
$5
$0
Denver
Total
Rent
Dallas Rent Trends
2007
2008
2009
Total
Rent
Denver Rent Trends
Tenant
Effective
$45
$40
36.25
$35
$30
$25
$20
31.75
24.08
17.14
$15
$10
25.00
27.56
28.54
29.50
20.25
19.93
24.96
21.71
18.64
32.00
27.45
28.26
19.12
20.20
27.28
9.08
2004
2005
11.89
16.77
10.24
9.57
8.76
9.74
2008
2009
2010
2011
38.55
29.14
22.43
14.95
8.21
Landlord
Effective
18.43
11.88
$5
$0
2006
2007
2012
2013
2014
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
26
CBD Rent Trends
Houston
Total rent rose for the fourth straight year,
increasing by 11.0% to $49.04. Net rent
jumped by 12.3% to $33.25. Operating
expenses (+2.8%) and real estate taxes
(+18.2%) rose but tenant electricity was
unchanged. Concession packages inched
up by 1.8% to $66.00, but declined relative
to total rent. Tenant effective rent spiked by
13.3% to $39.93, more than 20.0% above
the peak in the prior expansion cycle.
Landlord effective rent rose by 15.5% to
$23.64, another record number.
Total rent rose for the second time in the
last three years, increasing by 11.4% to
$39.92. Net rent spiked by 17.5%, from
$20.00 to $23.50. Operating expenses
and tenant electricity both registered
2.4% gains. Real estate taxes jumped by
8.2% to $3.57 as soaring investment sales
boosted valuations. Landlords offset some
of the rental rate increases by padding
concession packages, which rose by
15.3% to $83.00. Tenant effective rent
increased by 9.8% to $28.47. Landlord
effective rent pushed up by 17.5% from
$10.59 to $12.44.
27
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Tenant
Effective
Landlord
Effective
$60
49.04
$50
44.18
36.83
$40
31.32
$30
25.37
21.00
20.37
$20
$10
$0
Downtown Los Angeles
Total
Rent
Houston Rent Trends
15.54
6.50
5.87
2004
2005
24.93
27.12
20.13
16.09
2007
15.37
2008
37.96
39.93
35.24
26.55
11.98
2006
32.48
34.37
31.66
27.29
21.00
16.17
34.45
2009
13.63
2010
15.50
2011
Total
Rent
Downtown Los Angeles Rent Trends
31.06
18.39
2012
20.46
2013
Tenant
Effective
$45
$40
$35
31.76
32.25
$30
$25
34.18
24.93
35.47
36.73
26.22
27.07
22.65
23.00
11.15
11.24
12.24
12.70
12.77
2004
2005
2006
2007
2008
35.44
36.14
35.85
25.09
25.10
25.50
10.64
10.91
10.18
2009
2010
2011
37.90
27.55
23.64
2014
Landlord
Effective
39.92
35.85
25.91
28.47
$20
$15
12.39
10.59
12.44
$10
$5
$0
2012
2013
2014
SERI2015
West Los Angeles
Total rent grew for the second year in a
row, but jumped more sharply than in
2013, rising by 10.3% from $41.20 to
$45.45. Net rent increased by 16.0%
from $25.00 to $29.00. Real estate taxes
(+9.3%) and tenant electricity (+10.6%)
registered moderate gains but operating
expenses (-3.5%) dropped slightly.
Landlords continued to extend generous
concessions, which increased by 5.7%
from $70.00 to $74.00. The value of
concession packages relative to total rent
fell slightly, though. Tenant effective rent
spiked by 11.7% from $31.54 to $35.24.
Landlord effective rent jumped by 22.1%
from $15.94 to $19.46.
Total
Rent
West Los Angeles Rent Trends
Landlord
Effective
$60
46.93
$50
$40
$30
41.86
32.17
36.00
$20
45.45
40.77
38.85
38.40
33.17
27.31
22.10
37.96
50.43
20.04
23.55
26.19
15.60
10.89
28.50
28.05
41.20
30.16
14.11
13.43
14.56
2009
2010
2011
39.53
28.49
13.12
2012
41.20
31.54
15.94
35.24
19.46
$10
$0
2004
2005
2006
2007
2008
Total
Rent
Miami Rent Trends
Miami
Total rent increased moderately for the
fourth consecutive year, rising by 2.8%
to $40.55, the first time it has exceeded
$40.00 since 2008. Net rent rose by
3.2% from $23.50 to $24.25. Operating
expenses (+1.9%), real estate taxes
(+2.0%) and tenant electricity (+3.4%) all
registered annual growth. Concessions
were unchanged, remaining at $80.00, but
fell relative to total rent. Tenant effective
rent averaged $29.51, a 3.9% year-onyear increase, but was still roughly $10.00
below the $39.07 peak in 2007. Landlord
effective rent rose by 5.2% to $16.11.
Tenant
Effective
$50
45.00
$45
$40
$35
40.50
34.00
35.67
$30
$25
$20
29.17
17.72
30.67
19.13
22.35
24.97
Tenant
Effective
44.00
35.50
39.07
2013
36.92
38.66
35.75
34.77
26.66
25.94
25.19
12.91
13.92
12.89
13.85
2009
2010
2011
2012
2014
Landlord
Effective
39.45
40.55
28.41
29.51
15.32
16.11
2013
2014
37.65
22.66
$15
26.79
$10
$5
$0
2004
2005
2006
2007
2008
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
28
CBD Rent Trends
Manhattan (Downtown)
Total rent rose for the fourth straight year,
increasing by 8.5% from $47.59 to $51.65.
Net rent jumped by 14.7% from $24.50 to
$28.10. Operating expenses (+2.2%) and
real estate taxes (+2.2%) posted steady
increases but tenant electricity (+0.4%) was
nearly unchanged. Concession packages
rose, increasing by 8.8% to $101.00,
but were flat relative to total rent. Tenant
effective rent jumped by 8.4% to $37.71,
but was still nearly 30.0% below its 2007
peak. Landlord effective rent spiked by
18.7% to $14.61, roughly half of the $29.20
peak attained in 2007.
Manhattan (Midtown)
Total rent grew for the fourth consecutive
year, rising by 7.5% from $76.90 to $82.70.
Net rent increased by 11.0% from $45.25
to $50.25. Operating expenses (+2.6%),
real estate taxes (+2.7%) and tenant
electricity (+1.5%) all registered moderate
gains. Concessions spiked by 7.6% to
$138.00. Tenant effective rent rose by 7.5%
from $59.20 to $63.66. Landlord effective
rent jumped by 12.3% from $28.20 to
$31.67.
$70
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
61.07
$60
$50
51.53
40.52
$30
$20
29.65
40.54
41.18
30.19
11.29
24.01
11.33
35.00
2005
2006
2007
2008
46.24
47.59
33.13
34.78
10.93
12.31
2012
2013
51.65
37.71
26.99
22.17
0.71
2004
Landlord
Effective
41.34
9.27
$10
$0
43.74
30.93
29.20
21.03
Tenant
Effective
56.72
50.58
45.96
$40
2009
2010
14.61
5.08
2011
Total
Rent
Manhattan (Midtown) Rent Trends
Tenant
Effective
2014
Landlord
Effective
$120
102.45
$100
$80
88.02
64.46
$40
81.62
78.70
63.13
53.11
51.90
47.26
38.04
$20
2004
2005
2006
2007
2008
2009
74.68
76.90
58.43
58.79
59.20
28.10
27.80
28.20
2011
2012
2013
82.70
63.66
43.10
29.81
19.21
74.30
58.00
64.65
63.69
54.11
94.59
92.93
73.34
$60
$0
29
Total
Rent
Manhattan (Downtown) Rent Trends
31.67
14.45
2010
2014
SERI2015
New Jersey
Total rent posted its first significant gain
since 2008, rising by 9.9% to $29.95. Net
rent increased by 15.9%, from $13.80 to
$16.00. Operating expenses (+2.9%), real
estate taxes (+3.2%) and tenant electricity
(+8.3%) maintained their steady growth.
Concessions rose by 4.2% to $62.50, but
fell relative to total rent. Tenant effective
rent increased by 12.4% to $21.33 – nearly
10.0% below its highest mark of $23.11
in the last cycle. Landlord effective rent
spiked by 33.5% to $7.23 but was well
under its peak of $10.85 in 2004.
Philadelphia
Total rent rose by 14.8% to $34.74. Net
rent increased by 37.0% from $15.80
to $21.65. Operating expenses (+3.6%)
continued to rise but tenant electricity fell
slightly (by 1.5%) and real estate taxes
plummeted by 40.7% due to a citywide
property reassessment. Concessions
inched up moderately, rising by 4.0%
to $56.77, but declined relative to total
rent. Tenant effective rent rose by 18.5%
to $26.90, its highest level on record.
Landlord effective rent also reached a new
peak, spiking by 61.2% to $13.82.
Total
Rent
New Jersey Rent Trends
Tenant
Effective
Landlord
Effective
$35
$30
27.60
27.78
28.49
28.66
29.32
$25
22.91
22.54
23.11
22.87
23.11
28.11
27.72
27.02
27.25
21.21
20.52
19.92
19.15
18.97
7.68
7.05
6.41
5.68
5.41
2009
2010
2011
2012
2013
$20
$15
10.85
10.37
10.26
$10
9.88
9.46
29.95
28.45
21.33
7.23
$5
$0
2004
2005
2006
2007
2008
Total
Rent
Philadelphia Rent Trends
Tenant
Effective
$40
$25
Landlord
Effective
34.74
$35
$30
2014
27.35
21.55
26.50
20.29
28.92
22.02
30.50
23.60
29.33
28.90
23.53
22.69
28.21
21.31
28.31
20.03
29.90
30.23
26.90
21.87
22.70
$20
13.82
$15
$10
9.15
8.24
9.60
10.78
10.69
9.78
8.35
6.49
8.21
8.57
2012
2013
$5
$0
2004
2005
2006
2007
2008
2009
2010
2011
2014
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
30
CBD Rent Trends
San Diego
Total rent grew for the second consecutive
year, rising by 2.3% from $30.40 to $31.10.
Net rent increased by 3.2% from $15.75
to $16.25. Operating expenses (+0.7%),
real estate taxes (+2.2%) and tenant
electric (+1.7%) all registered moderate
gains. Landlords continued to pull back on
concessions, which fell by 1.8% from $55.00
to $54.00. Tenant effective rent consequently
rose by 4.0% from $21.54 to $22.40.
Landlord effective rent jumped by 8.0% from
$8.55 to $9.23.
$50
$45
$40
$35
Total rent increased for the fourth straight
year, rising by 15.1% to $68.85. Net rent rose
by 21.0% to $47.50. Operating expenses
(+2.9%), real estate taxes (+6.9%) and tenant
electric (+3.0%) all pushed higher in 2014.
Tenant effective rent spiked by 18.0% to
$57.25, pushing nearly 10.0% above its peak
in 2007. Landlord effective rent jumped by
27.1% to $37.58.
$25
28.11
$20
16.64
43.42
38.09
36.98
Tenant
Effective
Landlord
Effective
37.13
31.93
31.65
19.66
18.83
24.58
33.38
32.32
31.39
24.30
23.17
11.44
10.29
30.04
30.40
31.10
20.78
21.54
22.40
7.86
8.55
9.23
2012
2013
2014
23.14
25.81
13.03
$10
$5
2004
2005
2006
2007
2008
2009
2010
2011
Total
Rent
San Francisco Rent Trends
Tenant
Effective
Landlord
Effective
$80
68.85
$70
59.79
$60
$50
$40
34.95
36.21
$30
$10
$0
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
43.89
$15
$20
31
36.76
32.95
$30
$0
San Francisco
Total
Rent
San Diego Rent Trends
42.38
35.94
28.51
30.24
13.98
15.70
2004
2005
53.76
36.24
57.93
55.06
2007
55.75
58.35
57.25
50.68
33.11
45.87
2008
43.46
46.16
48.36
48.53
37.58
28.20
20.86
2006
53.15
59.80
2009
25.40
2010
27.70
29.55
29.57
2011
2012
2013
2014
SERI2015
Tampa Bay
Total rent rose by 2.8% to $28.00, a new
peak. Net rent increased by 4.7% from
$16.10 to $16.85. Operating expenses,
real estate taxes and tenant electricity
were unchanged. Landlords continued to
reduce concession packages, with the value
dipping by 4.9% to $43.25 in 2014. Tenant
effective rent averaged $22.03, a year-onyear increase of 5.0%, and just above the
2007 peak of $21.92. Landlord effective rent
jumped by 10.1% to $10.68.
$30
25.00
$25
$20
Total rent posted a minor increase for the
second consecutive year, rising by 1.4%
from $64.68 to $65.59. Net rent increased
by 1.2% from $40.25 to $40.75. Operating
expenses (+2.8%) and real estate taxes
(+1.4%) pushed higher but tenant electricity
fell by 0.7%. Concessions fell slightly, by
2.8%, but remained at near-record levels,
averaging $132.35. Tenant effective rent still
rose by 3.2% to $47.33. Landlord effective
rent registered a negligible increase from
$21.52 to $21.55.
22.00
17.03
23.00
20.86
$10
26.75
11.48
6.76
6.22
2004
2005
27.00
26.50
26.50
Tenant
Effective
26.50
26.50
18.59
19.31
21.92
19.29
17.34
$15
17.65
18.23
11.10
7.94
6.61
7.19
7.55
8.27
2009
2010
2011
2012
27.25
20.98
9.71
Landlord
Effective
28.00
22.03
10.68
$5
$0
Washington, DC
Total
Rent
Tampa Bay Rent Trends
2006
2007
2008
Total
Rent
Washington, DC Rent Trends
2013
Tenant
Effective
2014
Landlord
Effective
$80
$70
$60
53.00
55.50
$50
$40
$30
45.41
27.88
48.60
28.72
63.75
64.00
55.47
54.34
65.75
67.00
68.21
53.20
52.82
64.45
64.68
65.59
45.88
47.33
23.22
21.52
21.55
2012
2013
2014
58.50
50.57
29.57
31.99
47.92
28.60
21.09
26.32
26.68
2010
2011
47.89
$20
$10
$0
2004
2005
2006
2007
2008
2009
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
32
Suburban Rent Trends
Fort Lauderdale
Total rent rose slightly, increasing by 3.3%
to $34.99. Net rent jumped by 4.1%, from
$18.50 to $19.25. Operating expenses
(+2.3%), real estate taxes (+2.7%) and tenant
electric (+2.0%) all pushed higher. The value
of concessions inched up by 2.1% to $48.50,
but was flat relative to total rent. Tenant
effective rent increased by 3.6% to $28.30 –
remaining well below the 2007 peak level of
$32.73. Landlord effective rent rose by 4.7%
from $13.02 to $13.63.
$40
$35
$25
$20
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
31.50
Landlord
Effective
25.98
$10
38.25
34.70
33.00
30.98
$15
16.88
2005
2006
33.10
33.60
33.88
34.99
25.67
26.33
25.99
26.70
27.33
28.30
12.10
11.27
11.87
12.41
13.02
13.63
2009
2010
2011
2012
2013
2014
28.90
17.04
14.77
11.18
2004
33.47
32.73
27.48
16.09
33.50
2007
2008
Total
Rent
Orange County Rent Trends
$45
39.00
$40
$35
$30
29.40
$25
$20
$15
$10
24.85
15.79
35.14
28.80
32.77
22.12
18.18
2005
27.59
26.97
26.85
27.65
28.89
19.31
18.69
19.26
19.90
20.61
9.34
8.61
9.65
10.15
10.41
2010
2011
2012
2013
2014
28.08
24.79
21.21
17.55
11.26
2004
Landlord
Effective
33.60
31.80
27.66
Tenant
Effective
36.91
$5
$0
33
36.50
$30
$0
Total rent rose by 4.5% to $28.89. Net rent
increased by 5.0% from $17.00 to $17.85.
Operating expenses (+5.0%) and real estate
taxes (+2.7%) rose, but tenant electric was
unchanged. Concessions pushed a bit higher,
increasing by 6.9% to $60.00, but registered
a minimal increase relative to total rent.
Tenant effective rent rose slightly (+3.5%) to
$20.61, but remained well below the 2006
peak of $35.14. Landlord effective rent
posted a moderate 2.6% increase, pushing
up to $10.41.
Tenant
Effective
$45
$5
Orange County
Total
Rent
Fort Lauderdale Rent Trends
2006
2007
2008
2009
SERI2015
Silicon Valley
Total rent rose by 6.4% to $43.05, hitting
another new peak. Net rent increased by
9.0% from $25.00 to $27.25. Operating
expenses (+3.0%) and real estate taxes
(+2.5%) both registered gains but tenant
electric was unchanged. Concessions
dropped slightly, falling by 4.3% to $45.00.
Tenant effective rent pushed higher, rising
by 8.8% to $36.11. Landlord effective rent
jumped by 12.4% to $22.84.
$45
40.45
$40
$35
$30
29.50
31.75
$20
$15
$0
34.25
34.25
Landlord
Effective
28.08
27.92
26.54
12.30
11.53
2004
2005
19.55
2006
15.89
15.73
2007
2008
14.34
13.73
2009
2010
42.55
$45
$35
$30
33.50
28.75
36.40
35.68
23.23
17.35
2012
20.32
2013
Tenant
Effective
36.11
22.84
2014
Landlord
Effective
41.27
40.25
36.85
35.82
31.23
23.98
26.60
26.59
17.13
16.42
25.36
23.86
14.39
14.85
2004
2005
14.74
29.28
13.30
14.17
2009
2010
28.57
25.40
24.78
20.15
$15
$10
36.25
43.05
29.50
$25
$20
2011
Total
Rent
Northern Virginia Rent Trends
$40
29.94
33.20
25.67
21.33
14.42
37.65
40.45
34.00
32.43
25.58
21.79
34.25
27.50
$25
$5
Total rent rose by 12.0% to $41.27, a new
peak. Net rent increased by 16.0% from
$25.00 to $29.00. Operating expenses
(+4.2%), real estate taxes (+5.2%), and
tenant electric (+0.7%) all registered annual
growth. The value of concessions spiked
to a new record, rising by 10.9% to $92.00,
but fell slightly relative to total rent. Tenant
effective rent averaged $28.57, a year-onyear increase of 12.5%, but still below the
peak of $31.23 in 2011. Landlord effective
rent jumped by 17.4% to $16.98.
Tenant
Effective
$50
$10
Northern Virginia
Total
Rent
Silicon Valley Rent Trends
18.19
14.46
16.98
$5
$0
2006
2007
2008
2011
2012
2013
2014
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
34
Suburban Rent Trends
Suburban Tenant and Landlord
Effective Rent
Tenant effective rent fell in only two
markets, Fairfield County (-3.1%) and
Westchester (-2.9%). Effective rent in most
suburban markets increased at a slower
pace than in CBDs, roughly half of the
markets rose by less than 5.0%. Even so,
growth of 2.0% in West Palm Beach, 3.1%
in Cook County and 2.3% in Long Island
represents an improvement from the last
several years. Tenants in Central Perimeter
(+18.1%) and the Waltham/Route 128
Corridor surrounding Cambridge (+17.6%)
faced sharp jumps in rent over the course
of the year.
Westchester (-8.8%) and Fairfield County
(-7.2%) were the only two markets to
post declines in landlord effective rent.
Further cutbacks by banks and elevated
availability pushed rent lower. Increases
in North Dallas/Corridor (+26.3%) and
West Loop/Galleria (+14.8%) underscored
tenant’s continued preference for
suburban space in Texas. Central
Perimeter (+51.9%) has become one of
the tightest areas in Atlanta. Finally, Silicon
Valley’s 12.4% jump in effective rents does
not fully reflect the extent of demand for
space among larger tech companies.
35
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Suburban Tenant Effective Rent Comparison: Percentage Change 2013 - 2014
Central Perimeter, GA
Waltham (Route 128), MA
Northern Virginia
North Dallas Corridor, TX
West Loop/Galleria, TX
Silicon Valley, CA
Scottsdale/Tempe, AZ
Raleigh/Durham, NC
Southeast, CO
Orange County, CA
Fort Lauderdale, FL
Cook County, IL
DuPage County, IL
Long Island, NY
West Palm Beach, FL
Main Line/Conshohocken, PA
Westchester, NY
Fairfield County, CT
4.2%
3.6%
3.5%
3.1%
2.9%
2.3%
2.0%
0.9%
-2.9%
-3.1%
-5%
0%
10.4%
10.1%
8.8%
6.0%
5.6%
5%
18.1%
17.6%
12.5%
10%
15%
20%
Suburban Landlord Effective Rent Comparison: Percentage Change 2013 - 2014
Central Perimeter, GA
Waltham (Route 128), MA
North Dallas Corridor, TX
Northern Virginia
West Loop/Galleria, TX
Silicon Valley, CA
Scottsdale/Tempe, AZ
Cook County, IL
Raleigh/Durham, NC
Southeast, CO
DuPage County, IL
Fort Lauderdale, FL
Long Island, NY
West Palm Beach, FL
Orange County, CA
Main Line/Conshohocken, PA
Fairfield County, CT
Westchester, NY
-10%
51.9%
33.5%
26.3%
17.4%
14.8%
12.4%
11.1%
11.0%
8.9%
7.1%
6.4%
4.7%
4.6%
3.0%
2.6%
1.5%
-7.2%
-8.8%
0%
10%
20%
30%
40%
50%
$5
$10
Raleigh/Durham, NC
$4
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Cook County, IL
$3.24
$6.47
$7.23
2008
DuPage County, IL
$8.34
$8.46
$8.82
2013
Central Perimeter, GA
Southeast, CO
Raleigh/Durham, NC
$9.13
$9.28
$10.41
$11.62
$13.63
$14.55
$16.03
$16.92
Suburban Landlord Effective Rent
Scottsdale/Tempe, AZ
North Dallas Corridor, TX
$8
Westchester, NY
Orange County, CA
Long Island, NY
$12
Fort Lauderdale, FL
Fairfield County, CT
Main Line/Conshohocken, PA
$16.98
$16
Waltham (Route 128), MA
$20.42
$20
Northern Virginia
$22.12
2014
West Loop/Galleria, TX
$22.84
2009
West Palm Beach, FL
$16.25
$17.07
$17.19
2008
Southeast, CO
$17.22
$18.85
$20.61
$22.54
$23.18
$27.30
$28.30
$28.31
$28.55
$28.57
$32.08
$32.23
$32.68
$36.11
2013
Cook County, IL
$15
DuPage County, IL
Central Perimeter, GA
Orange County, CA
Scottsdale/Tempe, AZ
$20
North Dallas Corridor, TX
Westchester, NY
Fort Lauderdale, FL
$25
Main Line/Conshohocken, PA
Long Island, NY
Northern Virginia
West Loop/Galleria, TX
Fairfield County, CT
$30
Waltham (Route 128), MA
$36.92
Suburban Tenant Effective Rent
Silicon Valley, CA
$0
Silicon Valley, CA
$35
West Palm Beach, FL
SERI2015
2009
2014
$40
$24
$0
36
Glossary
Concessions: Includes the tenant improvement allowance plus the value of the rental rate abatement. Amortized concessions are amortized over the average market lease term, using beginning-of-period payments.
Landlord Effective Rent: An estimate of rent received from a tenant less related expenses.
Net Rent: The gross rental rate exclusive of the tenant’s proportionate share of real estate taxes,
operating expenses and tenant electricity.
Operating Expenses: Includes (1) heating, ventilation and air conditioning (HVAC); (2) maintenance; (3) common
area utilities and electricity; (4) cleaning; and (5) all other non-capital costs associated with
the operation of a building.
Real Estate Taxes: Local real estate taxes exclusive of special assessments and other one-time charges.
Tenant Effective Rent: An estimate of the actual cost of occupancy for the tenant. The calculation is the total rent
minus amortized lease concessions.
Tenant Electricity: Payments made by the tenant, whether to the landlord or public utility, or by the landlord
as a general building expense, for the electrical power utilized within a tenant’s premises,
exclusive of building HVAC.
Total Rent: The sum of the four rental rate components: net rent, operating expenses, real estate taxes
and electricity.
37
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
SERI2015
SERI Supplement
U. S. GDP - Post WWII
Following a sharp 2.1% decline in the first quarter of 2014, GDP strengthened in the second and third quarters. The Federal Reserve is projecting
GDP growth in the 2.3% to 2.7% range for the next couple of years. More optimistic forecasts call for GDP growth exceeding 3.0% in 2015.
16.0%
Source: U.S. BEA
1950s: AGR
+6.7%
14.0%
1960s
+4.9%
12.0%
1970s
+5.1%
1980s
+4.1%
1990s
+3.7%
8.0%
04-08
+2.6%
6.0%
10-14
+2.2%
4.0%
2.0%
0.0%
-2.0%
-4.0%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
2014Q1
2012Q3
2011Q1
2009Q3
2008Q1
2006Q3
2005Q1
2003Q3
2002Q1
2000Q3
1999Q1
1997Q3
1996Q1
1994Q3
1993Q1
1991Q3
1990Q1
1988Q3
1987Q1
1985Q3
1984Q1
1982Q3
1981Q1
1979Q3
1978Q1
1976Q3
1975Q1
1973Q3
1972Q1
1970Q3
1969Q1
1967Q3
1966Q1
1964Q3
1963Q1
1961Q3
1960Q1
1958Q3
1957Q1
1955Q3
1954Q1
1952Q3
1951Q1
1949Q3
-6.0%
1948Q1
U.S. GDP - Annual Growth Rate
10.0%
38
SERI Supplement - U.S. Economy
Dow Jones Industrial Average (1990 - 2014)
The Dow suffered several sharp declines between 2009 and 2011, precipitated by events such as Eurozone turbulence and periodic debt/
budget brinkmanship in Washington. Since 2013, the Dow has pushed steadily upwards, punching through a series of crises including
standoffs in Washington, the Eurodebt crisis and more recently the taper tantrum and adjustment in energy prices.
20,000
4Q 2014: 17,823
18,000
16,000
3Q 2007: 13,895
Stock Price Index
14,000
12,000
10,000
8,000
1Q 2009: 7,609
6,000
4,000
2,000
Source: Dow Jones & Company
39
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
2014Q3
2014Q1
2013Q3
2013Q1
2012Q3
2012Q1
2011Q3
2011Q1
2010Q3
2010Q1
2009Q3
2009Q1
2008Q3
2008Q1
2007Q3
2007Q1
2006Q3
2006Q1
2005Q3
2005Q1
2004Q3
2004Q1
2003Q3
2003Q1
2002Q3
2002Q1
2001Q3
2001Q1
2000Q3
2000Q1
1999Q3
1999Q1
1998Q3
1998Q1
1997Q3
1997Q1
1996Q3
1996Q1
1995Q3
1995Q1
1994Q3
1994Q1
1993Q3
1993Q1
1992Q3
1992Q1
1991Q3
1991Q1
1990Q3
1990Q1
0
SERI2015
Home Prices, Case-Shiller 20-City Composite Index (2000 - 2014)
Home prices – a key determinant of household wealth – are three years into recovery. Based on the Case-Shiller 20-City Composite Index,
pricing has increased by 26.9% since it hit a low point in late 2011. Of note, between 2000 and 2003, prices rose by 35.7%. Price growth
appears to have lost a little of its momentum in the last few months and actually fell slightly in the summer of 2014, the first decline since early
2012, but prices have rebounded since then.
2.0%
2000-2006:
105.4% increase
Since 2011:
26.9% increase
1.5%
1.0%
0.0%
-0.5%
-1.0%
-1.5%
-2.0%
2007-2011:
51.0% decline
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Aug-14
Mar-14
Oct-13
May-13
Jul-12
Feb-12
Sep-11
Apr-11
Nov-10
Jun-10
Jan-10
Aug-09
Mar-09
Oct-08
May-08
Dec-07
Jul-07
Feb-07
Sep-06
Apr-06
Nov-05
Jun-05
Jan-05
Aug-04
Mar-04
Oct-03
May-03
Dec-02
Jul-02
Feb-02
Sep-01
Apr-01
Nov-00
Jun-00
Dec-12
Source: S&P/Case-Shiller
-2.5%
Jan-00
Monthly Change
0.5%
40
SERI Supplement
New & Existing Home Sales (1968 - 2014)
The housing market started to add to the U.S. economy in the second half of 2011 as home sales rose and home builders slowly ramped up
activity. Still, housing sales remained well below their peak levels. Gross private domestic investment in residential structures was a drag on
GDP in 2009 through June of 2011, but has been adding to GDP since then. Even so, housing sales remain well below their pre-recession peak
levels. Existing home sales have averaged 4.39 million units in the last twelve months and new home sales averaged 432,000 units (about onefourth of their peak of 1.28 million in 2006).
9,000
New Home Sales
Source: NAR, U.S. Census
Existing Home Sales
8,000
2006 average: 6.18 m existing, 1.28 m new homes
Home Sales (Thousands)
7,000
6,000
2014 avg: 4.4 m existing, 432k new homes
5,000
4,000
3,000
2,000
1,000
41
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
Sep-14
May-13
Jan-12
Sep-10
May-09
Jan-08
Sep-06
May-05
Jan-04
Sep-02
May-01
Jan-00
Sep-98
May-97
Jan-96
Sep-94
May-93
Jan-92
Sep-90
May-89
Jan-88
Sep-86
May-85
Jan-84
Sep-82
May-81
Jan-80
Sep-78
May-77
Jan-76
Sep-74
May-73
Jan-72
Sep-70
May-69
Jan-68
0
SERI2015
U.S. Auto Sales, Monthly (1980 - 2014)
Auto sales have increased steadily from the low point reached in 2009, but remain about 25% below their pre-recession levels.
2,000
Source:BEA
2001 - 2007 average:
1.43 m per month
1,800
1,600
2008 - 2014 average:
1.15 m per month
1,200
1,000
800
600
400
200
0
Dec-79
Aug-80
Apr-81
Dec-81
Aug-82
Apr-83
Dec-83
Aug-84
Apr-85
Dec-85
Aug-86
Apr-87
Dec-87
Aug-88
Apr-89
Dec-89
Aug-90
Apr-91
Dec-91
Aug-92
Apr-93
Dec-93
Aug-94
Apr-95
Dec-95
Aug-96
Apr-97
Dec-97
Aug-98
Apr-99
Dec-99
Aug-00
Apr-01
Dec-01
Aug-02
Apr-03
Dec-03
Aug-04
Apr-05
Dec-05
Aug-06
Apr-07
Dec-07
Aug-08
Apr-09
Dec-09
Aug-10
Apr-11
Dec-11
Aug-12
Apr-13
Dec-13
Aug-14
Auto Sales, (Thousands)
1,400
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
42
SERI Supplement
U.S. Real Median Household Income (1990 - 2014)
On an inflation-adjusted basis, median household income finally showed some signs of stabilizing by 2012, and has posted modest increases
in all regions except the Midwest. Household income growth in the Northeast and West has been a bit stronger, and income in the South
continues to lag. Overall, household income is still slightly below its pre-recession levels.
$90,000
Median Houshold Income (Inflation-Ajdusted)
$78,703
$78,399
$80,000
$72,490
$71,024
$70,000
$66,810
$60,000
$50,000
U.S.
Northeast
West
South
Midwest
Source: U.S. Census Bureau
$40,000
43
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
SERI2015
Total Outstanding Consumer Installment Credit (1980 - 2014)
Consumer installment credit – such as credit cards, bank cards and other revolving debt – has risen steadily over the last few decades. Until
the most recent recession, households supplemented income with gains from higher home prices and home equity loans. They also padded
spending power with credit card debt. Households lowered this debt slightly between 2008 and 2010, but outstanding credit has started to rise
again as households and banks have both gained confidence.
Source: U.S. Board of Governors of the Federal Reserve System
Total Outstanding Consumer Installment Credit (Billions $)
$4,000
YE 2014:
$3.4 trillion
$3,500
$3,000
$2,500
July 2008:
$2.58 trillion
July 2010:
$2.39 trillion
$2,000
$1,500
$1,000
$500
$0
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
44
SERI Supplement
Mortgage Delinquency Rates (1980 - 2014)
Another area of improvement for the U.S. housing market has been the steady decline in delinquency rates from 9.0% to 10.0% in early 2010
to less than 6.5% in all four regions as of year-end 2014. Delinquency has remained much higher in the Northeast and South. In contrast,
delinquency rates in the West have improved dramatically from nearly 10.0% in 2010 to just under 4.0%, by far the lowest among the regions.
Source: MBA
12.0%
10.0%
Delinquency Rate
8.0%
6.0%
4.0%
2.0%
Northeast
West
South
Midwest
0.0%
45
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
SERI2015
Financial Accounts, Nonfinancial Corporations - Net Worth (1970 - 2014)
One of strongest features of the U.S. economy, virtually right out of the gates of the recovery, has been the strong balance sheets of corporations.
The net worth (assets less liabilities) of nonfinancial corporations took a big hit in the recession, falling to just under $14 trillion, but has pushed
steadily higher, rising to $20.5 trillion at of year-end 2014. Companies have deployed the funds for mergers and acquisitions, dividend payouts, stock
buybacks, and equipment and software. However, most businesses did not start to aggressively expand payroll until 2014.
Source: Federal Reserve
Net Worth, Nonfinancial (Trillions $)
$25.00
$20.52
$20.00
$17.99
$15.00
$13.96
$10.00
$5.00
$0.00
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
46
SERI Supplement
U.S. Overall Monthly Employment Trends (2008 - 2014)
Overall employment has increased 52 months in a row (every month since October of 2010) with an average gain of 267,250 jobs in the last 12
months, up from 195,750 during the prior 12 months. If the recent average monthly gain in the number of jobs is sustained, Moody’s expects
the U.S. to return to full employment in mid-2016. Initial unemployment claims have also declined to 15-year lows.
600,000
Source: BLS
400,000
-8.7 million
Avg. -349k per month
Job Growth /Loss
200,000
0
-200,000
+10.8 million,
Average: +203k per month
-400,000
-600,000
-800,000
-1,000,000
47
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
SERI2015
U.S. Office-Using Monthly Employment Trends (2008 - 2014)
During the last four years, office-using employment – which includes the financial, professional/business services and information sectors – has
been slowly but consistently increasing, with losses in only five months since September of 2009. Employers have added 3.4 million office-using
jobs since the start of 2010, well above the 2.4 million shed in the recession. Following some weakness in late 2013, hiring accelerated in 2014,
with an average monthly gain of 74,166 jobs, well above the average of 58,250 gained per month in 2013.
200,000
Source: BLS
150,000
-2.4 million
Job Growth / Loss
100,000
50,000
0
-50,000
+3.4 million
-100,000
-150,000
-200,000
-250,000
-300,000
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
48
SERI Supplement - Office Market
Office-Using Employment & Change in Occupancy (Current Cycle vs. Prior Peak)
Office-using employment, and in turn occupancy rates, have pushed furthest above their prior peaks in Texas metros (red bubbles) and techfueled Northern California (yellow). Office-using employment in Austin, for example, is 23.2% above its prior peak and its occupancy rate has
risen by 180 basis points. In contrast nearly every market in the Northeast (light red) and Midwest (green) is below its prior peak in occupancy
despite reaching new levels in employment. Sunbelt markets, such as Phoenix and South Florida still have a lot of excess space.
30.0%
Office-Using Employment % Change (2008 vs Current)
25.0%
Market
Austin : +23.2% ,
+180 bps
Northeast
Southeast
Midwest
20.0%
Texas & Plains
SVAL
Southwest
15.0%
Bay Area & Northwest
Mid-Atlantic
DFW
SFO
HOU
SNT
10.0%
ATL
5.0%
0.0%
Phoenix:
+1.0, -940 bps
-5.0%
BLT
CIN
CHA
NYC
IND
BOS
DEN
SEA
POR
MIN
RDUREBAY KC
SFL
STL
TBAY DC
CHI LIS
SDO
PHI
L.A.
NJ
DET
OC
-10.0%
-1,200
49
-1,000
-800
-600
-400
-200
0
Occupancy Rate Change from prior peak (basis points)
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
200
400
Boston (BOS)
Manhattan (NYC)
Long Island, NY (LIS)
New Jersey (NJ)
Philadelphia (PHI)
Baltimore, MD (BLT)
Washington, DC (DC)
Raleigh/Durham (RD)
Charlotte (Cha)
Atlanta (ATL)
Tampa Bay (TBY)
South Florida (SFL)
Chicago (CHI)
Detroit (DET)
Cincinnati (CIN)
Indianapolis (IND)
St. Louis (St.L)
Minneapolis (MIN)
Dallas/Ft. Worth (DFW)
Houston (HOU)
Austin (AUS)
San Antonio (SNT)
Kansas City (KC)
Denver (DEN)
Phoenix (PHO)
Los Angeles (LA)
Orange County (OC)
San Diego (SDO)
Silicon Valley (SVAL)
E Bay/Oakland (EBAY)
San Francisco (SFO)
Portland, Or (POR)
Seattle (SEA)
Source: BLS
Occupancy
Rate 2014 v.
2008
Off. Emp. 2014
vs. 2008
Current
Vacancy
-10
-270
-80
-410
-190
-200
-460
-430
-170
-570
-600
-680
-170
-280
-330
30
-20
-510
140
-60
180
-140
-280
140
-940
-550
-530
-390
180
-300
200
-50
-250
3.3%
3.9%
-0.4%
-2.5%
-2.7%
6.2%
0.1%
0.0%
7.0%
5.3%
0.0%
1.9%
-0.6%
-4.8%
4.7%
8.7%
2.2%
3.2%
11.8%
11.2%
23.2%
10.6%
2.2%
5.3%
1.0%
-2.7%
-7.9%
-1.3%
18.2%
2.5%
10.8%
3.3%
3.4%
10.8%
8.6%
9.1%
17.8%
13.7%
13.2%
12.1%
14.2%
12.2%
15.7%
24.4%
14.5%
12.2%
20.4%
17.3%
11.7%
13.4%
15.1%
18.3%
13.2%
10.4%
13.5%
13.2%
12.4%
21.9%
13.8%
12.9%
13.8%
12.5%
14.1%
8.8%
10.8%
11.9%
SERI2015
National Office-Using Employment & Availability Rates (2000 - 2014)
The U.S. has added an average of 162,316 office-using jobs per quarter in this recovery, exceeding the quarterly average of 122,796 jobs
gained in the last expansion. Nevertheless, availability rates have fallen more slowly, in part due to unleased new construction but also because
of a widespread effort by companies to consolidate multiple locations and lease less space per employee. Twenty quarters after peaking at
18.8%, the availability rate has fallen by only 1.9 pp, a fraction of the 4.4 pp decline in the last recovery, which lasted eighteen quarters.
400,000
20.0%
peak: 18.8%
300,000
peak: 17.7%
17.5%
200,000
peak + 20 qtrs 16.9%
100,000
Job Growth/Loss
peak + 18 qtrs: 13.3%
-100,000
13.7%
12.5%
-200,000
-300,000
8.4%
Avg. Qtrly. job growth:
162,316
Avg. Qtrly. job growth:
122,796
10.0%
Availability Rate
15.0%
0
-400,000
-500,000
7.5%
-600,000
-700,000
Source: Savills Studley/BLS
Quarterly Job Loss
Quarterly Job Gain
Availability Rate
5.0%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
50
SERI Supplement
Leasing Volume as a Percentage of Historical Average (2014)
Annual leasing volume in the top U.S. office markets exceeded its long-term historical average by 5.0% during 2014. Manhattan (+28.7%),
Dallas/Fort Worth (+18.4%), San Francisco (+17.0%) and South Florida (+14.3%) registered the most significant above-average leasing.
Leasing volume in Silicon Valley (-21.0%) is likely understated – tenants requiring bigger blocks of space (in excess of 100,000 sf) have opted
for owner-user purchases and build-to-suits, circumventing the leasing market. In contrast, deal volume in Northern Virginia (-10.7%) and New
Jersey (-22.3%) is truly subpar.
New Jersey, 77.7%
Silicon Valley, 79.0%
Suburban Philadelphia, 82.1%
Orange County, 86.2%
Denver, 86.9%
Northern Virginia, 89.3%
San Diego, 90.9%
Suburban Maryland, 91.6%
Atlanta, 100.4%
Houston, 104.3%
Chicago CBD, 104.3%
National Total, 105.0%
Philadelphia CBD, 107.7%
Washington, DC, 110.3%
Los Angeles, 112.3%
Tampa Bay, 114.2%
South Florida, 114.3%
San Francisco, 117.0%
Dallas/Fort Worth, 118.4%
Manhattan, 128.7%
0.0%
51
20.0%
40.0%
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
60.0%
80.0%
100.0%
120.0%
140.0%
SERI2015
Unleased & Pre-Leased New Construction (Year-End 2014)
In addition to being very carefully controlled, new construction has also been concentrated in a handful of markets. The top six markets in
terms of new construction activity – have a combined total of 48.1 msf under construction – 15.0 msf of it in Houston. The next 12 markets
only have 35.0 msf underway. Of note, un-leased new construction amounts to more than 1.0% of current inventory in only three markets –
Houston (1.8%), Seattle (2.0%) and San Francisco (1.5%).
Millions of Square Feet Unleased/Pre-leased
0
2
4
6
8
Houston (1.8%)
9.7
Silicon Valley (0.7%)
6.3
Seattle (2.0%)
3.1
Dallas/Fort Worth (0.9%)
Boston (0.3%)
2.9
3.6
Chicago (0.3%)
Phoenix (0.6%)
3.3
Philadelphia (0.2%)
Miami (0.3%)
Pre-leased
Unleased New Construction
1.8
0.8
1.2 0.5
0.9
Northern New Jersey (0.5%)
San Diego (0.5%)
1.0
1.5
1.5
0.7
1.9
Atlanta (0.2%)
Raleigh/Durham (0.7%)
1.9
4.0
1.1
0.8
2.4
3.0
Denver (0.8%)
5.3
3.0
3.8
Manhattan (0.5%)
14
3.3
3.5
San Francisco (1.5%)
12
3.7
3.4
Washington, DC (0.6%)
Los Angeles (0.4%)
10
1.0
0.2
0.4
0.6
0.3
0.3
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
52
SERI Supplement
Tenant
Effective Rent
Inflation-Adjusted Rents and Concessions (2004 - 2014)
Landlord
Effective Rent
Amortized
Concessions
Adjusted for inflation, tenant effective rent rose to $45.23 in 2014 – based on 2004 dollars, tenants were paying the same amount they did in
2006. Concessions were as high as they have been in the last decade. Landlord effective rent increased to $22.59 in 2014, but was still about
10% below its level in 2006 due to elevated concessions and a steady rise in expenses.
$60
$16
Inflation-Adjusted Landlord & Tenant Eff. Rent
$12
$40
$8
$30
$6
$20
$4
$10
$0
CONC
TER
LER
53
$10
$2
2004
$8.01
$35.12
$17.45
2005
$7.88
$38.53
$20.03
2006
$7.89
$45.23
$25.87
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
2007
$8.42
$51.78
$31.57
2008
$10.19
$49.56
$28.32
2009
$12.72
$37.05
$15.85
2010
$12.04
$35.91
$14.54
2011
$12.55
$39.44
$18.03
2012
$12.53
$40.54
$18.75
2013
$13.23
$41.61
$19.66
2014
$13.91
$45.23
$22.59
$0
Amortized Value of Concessions (Inf. Adjuted)
$14
$50
SERI2015
Tenant
Effective Rent
Effective Rent Indexes (Base Year 2004)
Landlord
Effective Rent
Amortized
Concessions
Using an index with a base year of 2004, concession packages were up by 74% relative to 2004 in 2014. Landlord effective rent and tenant
effective rent were both 29% above the base year amount. Tenants were paying about 29% more in inflation-adjusted terms relative to 2004
levels, due primarily to higher gross rents in 2014 compared to 2004.
205
TER
LER
Conc
Inflation-Adjusted Index (Base Year 2004)
185
174
165
150
145
129
125
105
102
85
84
65
45
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
S AV I L L S E F F E C T I V E R E N T I N D E X 2 0 1 5
54
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