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
Sponsored | | Oct 13, 2014
CLT, glulam deliver strength, low profile, and aesthetics for B.C. office building
When he set out to design his company’s new headquarters building on Lakeshore Road in scenic Kelowna, B.C., Tim McLennan of Faction Projects knew quickly that cross-laminated timber was an ideal material.
| Oct 12, 2014
AIA 2030 commitment: Five years on, are we any closer to net-zero?
This year marks the fifth anniversary of the American Institute of Architects’ effort to have architecture firms voluntarily pledge net-zero energy design for all their buildings by 2030.
| Oct 9, 2014
Regulations, demand will accelerate revenue from zero energy buildings, according to study
A new study by Navigant Research projects that public- and private-sector efforts to lower the carbon footprint of new and renovated commercial and residential structures will boost the annual revenue generated by commercial and residential zero energy buildings over the next 20 years by 122.5%, to $1.4 trillion.
Sponsored | | Oct 7, 2014
Boost efficiency with advanced framing
As architects continue to search for ways to improve building efficiencies, more and more are turning to advanced framing methods, particularly for multifamily and light commercial projects.
| Oct 6, 2014
Houston's office construction is soaring
Houston has 19 million square feet of office space under construction, 54% more than a year ago, and its highest level since the booming 1980s, according to local news reports.
| Oct 2, 2014
Budget busters: Report details 24 of the world's most obscenely over-budget construction projects
Montreal's Olympic Stadium and the Sydney Opera House are among the landmark projects to bust their budgets, according to a new interactive graph by Podio.
| Sep 30, 2014
With its 'stacked volumes' scheme, 3XN wins bid to design high-rise in Sydney
By dividing the 200-meter building into five separate volumes and placing atria throughout each volume, the spaces become smaller, more intimate social environments, according to the Danish architects.
Sponsored | | Sep 25, 2014
Architects transform warehouse into office space while preserving its historic nature
When it came time for CSHQA, an award-winning, full-service architecture and engineering firm, to move office locations, they didn’t need to look far. The 20,000-square-foot warehouse was not only a mere three blocks away, its renovation would be an ideal demonstration piece to show existing and potential clients.
| Sep 25, 2014
Look to history warily when gauging where the construction industry may be headed
Precedents and patterns may not tell you all that much about future spending or demand.
| Sep 24, 2014
Architecture billings see continued strength, led by institutional sector
On the heels of recording its strongest pace of growth since 2007, there continues to be an increasing level of demand for design services signaled in the latest Architecture Billings Index.
