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 | Jun 12, 2017
At 11.8 million-sf, LG Science Park is the largest new corporate research campus in the world
The project is currently 75% complete and on schedule to open in 2018.
Building Team Awards | Jun 8, 2017
Raising the bar: Zurich North American Headquarters
Silver Award: Forgoing a typical center-core design, the Zurich North America Headquarters rises 11 stories across three stacked bars.
Office Buildings | Jun 8, 2017
Take a look at the plans for Google’s new 1 million-sf London campus
Heatherwick Studio and BIG are designing the 11-story building.
Building Team Awards | Jun 6, 2017
Nerves of steel: 150 North Riverside
Platinum Award: It took guts for a developer and its Building Team to take on a site others had shunned for most of a century.
Office Buildings | Jun 2, 2017
Strong brew: Heineken HQ spurs innovation through interaction [slideshow]
The open plan concept features a Heineken bar and multiple social zones.
Office Buildings | May 30, 2017
How tech companies are rethinking the high-rise workplace
Eight fresh ideas for the high-rise of the future, from NBBJ Design Partner Jonathan Ward.
| May 24, 2017
Accelerate Live! talk: Applying machine learning to building design, Daniel Davis, WeWork
Daniel Davis offers a glimpse into the world at WeWork, and how his team is rethinking workplace design with the help of machine learning tools.
High-rise Construction | May 23, 2017
Goettsch Partners to design three-building Optics Valley Center complex
The Chicago-based firm won a design competition to design the complex located in Wuhan, China.
Office Buildings | Apr 18, 2017
Heineken USA Headquarters redesign emphasizes employee interaction
An open plan with social hubs maximizes co-working and engagement.
Office Buildings | Apr 17, 2017
Vertical integration triggers growth for an L.A.-based office furniture provider
Customization and technology drive sales for Tangram Interiors.