Second to none: Skyline investment booms outside gateway US cities

The skyline buildings in secondary U.S. markets are hot property among investors who are looking beyond premium skyscrapers in New York and San Francisco.

August 18, 2017

The trophy buildings that make up the skylines in “secondary” U.S. markets are becoming hot property among investors who are increasingly looking beyond premium buildings in the likes of New York, San Francisco and Boston.

Skyline real estate remains popular across the country, with occupancy rates increasing for the eighth year in a row, according to new JLL research, which examines office space in the tallest buildings across 57 markets. Vacancy in trophy skyline buildings hovers around 10 percent nationally, compared with 12.9 percent in overall office real estate, despite the fact that these premium spaces have seen rents leap up to a record $44.55 per square foot.

“Demand for high-rise space is skyrocketing,” says Scott Homa, JLL Director of U.S. Office Research, “One reason is that low-rise space in many desirable urban areas has been picked over by creative firms, which in recent years favored post-industrial brick-and-beam buildings in emerging neighborhoods.”

While professional services organizations like financial and law firms still lease the most space in high-rise properties, he says there’s mounting interest from tech, advertising, media and information companies, too. With diverse and plentiful hunger for impressive space showing no signs of abatement, it’s easy to see why investors are taking note.

“Skyline investment remains brisk, with both domestic and foreign buyers extremely active,” says Homa. “Skyline acquisitions were up more than $1.2 billion in 2016, which is significant when compared with the 10 percent decline registered in the broader office market.”

And with today’s investors showing more interest in relatively safe, well-positioned real estate, it’s natural that they might be looking for new areas of opportunity like active secondary markets.

Combined, investment volumes in the following secondary markets were up $5.9 billion in 2016—more than double the sales seen in 2015. Take a look to see how cities like Atlanta, Dallas, and Oakland are all commanding upward momentum in their own unique way.