Jones Lang LaSalle surveyed 20 buildings in the Central Business District
The vacancy rates in downtown’s 20 most prominent office properties has fallen to single-digits in the last six years.
According to the new Skyline report from Jones Lang LaSalle, a Chicago-based international real estate company with its local office in Royal Oak, vacancy rates in those 20 properties (see box) was 9.4 percent at the end of the first quarter.
It was 26 percent in 2010, according to the report.
The average asking rent in those buildings was $23.23 per square foot at the end of Q1.
The vacancy rates coupled with increasing rents have led to talk about new office building construction to meet demand for space, but the market doesn’t appear to be quite ready to financially justify speculative building, said Larry Emmons, market leader and managing director of JLL.
“We are trying to cross over that magic threshold to where we can get to spec development, and we aren’t there yet,” he said.
“Building costs have continued to go up. That’s one thing, the hard and soft costs. But a big component of the decision whether to spec or not is the amount of time that it’s going to take to fill the building, the lease-up time.”
Some new office construction is expected soon, with groundbreaking planned for later this summer on the 234,000-square-foot Little Caesars Global Resources Center at Woodward and Columbia Street.
Nearby, Dan Gilbert plans high-rise mixed-use and multifamily residential construction that’s expected to include some office space on the site of the former J.L. Hudson’s department store on Woodward between State Street and East Grand River.
Downtown’s total office market is about 13 million square feet.