Millennials are impacting the built environment under construction in 2015, according to a report from JLL tracking national construction trends. Throughout 2015, tenant improvement (TI)—or the renovation of existing space—has been a bright spot in the construction industry, even as labor and construction costs continue to rise.
There has been a 14.2% rise in TI projects since the second quarter of 2013, as landlords compete to attract tenants and companies compete for Millennial talent. This is especially prevalent in office markets that are saturated with new construction and renovation.
According to JLL’s latest report on U.S. non-residential construction activity, TI costs are declining in most key markets, as landlords are more willing to pay for them. For office building owners, the average TI package nationwide is approximately $30-$50 per-sf in Central Business Districts (CBDs). These packages have become especially important as tenants look to customize office space to attract and retain employees, especially Millennials.
“Millennials are shaping how and where we work, and also how and where we shop, and even the path our packages take from ship to doorstep,” said Todd Burns, President, JLL Project and Development Services, Americas. “By 2020, the U.S. workforce will be comprised of 50% Millennials. Individually, they may not realize that they’re influencing national construction trends to favor tenant improvement over new construction, but the numbers show it’s no coincidence.”
Companies are focused on accommodating their Millennial employees and their preference for offices in existing urban locations that are close to amenities and often with unique, open interior spaces. As a result, as companies begin to renovate older buildings, office space vacancies are slowly declining and are down 10.2% since Q2 2011.
The JLL research also points to other key construction industry trends playing out in 2015 including:
• Rethinking the retail environment: New “omnichannel” strategies emphasize convenience for customers by leveraging their brick-and-mortar stores as e-commerce pick-up/return depots, which in turn requires a revamped store configuration.
• Manufacturing industry driving construction volume: While construction in the education sector has been strong as universities focus on building new space to keep students engaged on campus, it’s been upstaged by a surprising category: manufacturing. Annual project spend on construction within the manufacturing sector has increased from $57.8 billion in 2014 to $90.3 billion YTD in 2015.
• Technology leads the charge: Technology companies are driving demand for cool, renovated office space. At the same time, industrial occupiers want and need, more custom e-commerce space, with higher shelving, specialized lighting, new technology and office space. Similarly, in retail, quick service restaurant chains are investing in new, creative interior build-outs to better compete with fast casual concepts.
• Future opportunity and capital planning: With construction starts at their highest point since the recession, the industry is still in the early stages of its recovery and will continue to grow in response to overall economic growth. Activity is still far below pre-recession highs, indicating growth will continue over the next several years, and dollar value of TI allowances will too.
Related Stories
Office Buildings | Sep 5, 2018
Facebook’s new Frank Gehry-designed Menlo Park HQ extension includes a massive green roof
Level 10 Construction was the general contractor for the project.
Office Buildings | Aug 27, 2018
The open office isn't dead
The degree of open or enclosed doesn't matter in high-performing work environments. If the space is designed to function well, all individual space types are rated as equally effective.
Office Buildings | Aug 17, 2018
An elliptical office building goes with the flow in Boston
Exterior design cuts waste, saves energy, says Building Team members.
Office Buildings | Aug 14, 2018
Flexibility tops office workers' wish lists, followed by healthcare
A survey of 1,000 office workers in the US and UK found that men value health insurance above any other work perk, whereas women would prefer more flexibility in their office job.
Office Buildings | Aug 13, 2018
There's more to the open office than headlines suggest
A study found that contrary to popular belief, the open office did not encourage—but rather, inhibited—face-to-face communication.
Office Buildings | Jul 31, 2018
Office trends 2018: Campus consolidations bring people together
Companies create community-rich work environments where employees can thrive.
Office Buildings | Jul 25, 2018
New study on occupant comfort advances Saint Gobain’s design approach for renovation and new construction
The building products giant gauges its employees’ perceptions of old and new headquarters environments.
Office Buildings | Jul 18, 2018
A day in the life of an ‘agile worker’
When our Gensler La Crosse office relocated last year, we leveraged the opportunity to support an agile workplace strategy (aka, no assigned seating). Here’s what I’ve experienced firsthand.
Office Buildings | Jul 17, 2018
Transwestern report: Office buildings near transit earn 65% higher lease rates
Analysis of 15 major metros shows the average rent in central business districts was $43.48/sf for transit-accessible buildings versus $26.01/sf for car-dependent buildings.
Office Buildings | Jun 18, 2018
Cube-shaped AmorePacific headquarters building completes construction in Seoul
The David Chipperfield Architects-designed project began in 2010.
