There are no averages to be found in JLL’s premium office rent tracker report, which ranks global markets on the basis of the highest achievable rent for space in the premier building within the city’s or sub-market’s most prestigious office district. The resulting picture may reveal more about the nature of premium tenancies than their host markets, but JLL analysts conclude pinnacle prices are generally in line with trends in Class AAA and Class A markets.

“Rents for premium buildings have fallen slightly in major office markets since 2020 by an average of 0.8 per cent in local currency terms. This compares to a decline of 0.7 per cent in net effective rents for the broader grade A office market,” the report notes. “Rental movements are also aligned within global regions, with the Americas showing growth in rents for both the premium office segment and the broader grade A market, while both Asia Pacific and EMEA (Europe, Middle East and Africa) have seen decreases in rents.”

The three Canadian entries in the 2021 list of 127 priciest spaces fall well down from the leaders — Central Hong Kong and Midtown New York, which are tied with a premium rent of USD $261 per square foot (psf). However, the summits of the Toronto, Montreal and Vancouver markets are steeper than in dozens of surveyed cities scattered throughout North and South America, Europe, Africa and Asia Pacific.

Toronto and Montreal deemed “mid-level”, Vancouver called a “value” market

Toronto and Montreal are ranked among 37 markets defined as “mid-level” on JLL’s scale, with premium rents in the range of USD $99 to $61 psf. Vancouver is lumped with the larger and much more wide-ranging group of 66 “value” markets with premiums rents of USD $60 or lower psf. An elite group of 24 markets commanding rents of USD $100 or greater psf are categorized as “high-end” premium spaces.

Toronto is highest ranked of the Canadian markets with a premium rent of USD $77 (CAD $98.50) psf, in lock step with the premium rent in Washington, DC. Montreal is next at USD $66 (CAD $84.50) psf. That’s sandwiched between Chicago at USD $67 and Hong Kong’s Kowloon East district and Edinburgh, both at USD $65. Vancouver’s priciest rent, at USD $55 (CAD $70.40) psf, sits under the bunched pack of Leeds, Glasgow and Dallas, all at USD $56, and just above Auckland, at USD $54 psf.

Within the top five markets, premium rents drop sharply from the twin frontrunners to Beijing’s Finance Street at USD $196, London’s West End and USD $191and Silicon Valley at USD $174 psf. Beijing’s central business district, Tokyo’s Marunouchi district, New York’s midtown south, Shanghai’s Pudong district and Beijing’s Zhongguancun district round out the top ten.

The United States is home to seven high-end markets, followed closely by China with six. Japan has four; Hong Kong, the United Kingdom and India each have two; and Singapore is a stand-alone member of the high-end group. Paris tops the mid-level rankings with a premium rent of USD $97 psf; San Diego is the last entry at USD $61 psf.

Of the 26 U.S. markets surveyed, 10 boast premiums that surpass Toronto’s, while 11 cities are rank below Vancouver. Premiums in Washington DC, Chicago, San Diego, Los Angeles’ central business district and Dallas are most comparable to those in the three Canadian markets. Austin may be most surprising market to outdistance Toronto — priciest space in the Texas capital goes for USD $89 psf, on par with Berlin and a notch above Geneva.

Detroit at USD $28, Minneapolis at USD $34 and Charlotte at USD $37 psf offer the best bargains on U.S. premium office space. Looking east, premiums for the thrifty in Europe can be found in: Bratislava (USD $19); Bucharest (USD $23) and Prague (USD $28).

Sustainability certification and flex space draw top-flight tenants

The offices commanding the highest rents typically boast sustainability certification; house financial, technology, legal or professional services occupancies; and are more likely to offer flex space than is the market norm. JLL analysts note that flex space, such as co-working areas or serviced offices, can be particularly attractive for tenants currently dealing with pandemic-related uncertainties about their future space needs, but the demand is expected to outlast the pandemic.

“Flexible space adoption is set to accelerate substantially as demand shifts from fixed long-term commitments to more agile and hybrid options,” the report projects. “Moving forward, flexible workspace is likely to grow from a low proportion of the overall market to a critical and mainstream element of commercial real estate.”

High-end premium office buildings appear somewhat ahead of the curve, with 63 per cent providing some form of flex space versus 38 per cent at mid-level and 39 per cent in the value range. That may also be reflective of the higher quotient of technology-based tenants in high-end premium spaces.

Overall, technology firms — both online platforms and hardware/software specialists — occupy 15 per cent of the premium office space, but they account for 21 per cent of occupancy in high-end premises. Notably, online platforms are much more conspicuous, filling 17 per cent of high-end premium offices versus 8 per cent of total premium space surveyed.

In contrast, mid-level premium space accommodates a smaller fraction of technology tenants, at just 3 per cent, and a disproportionately larger share of banking and financial service tenants, at 68 per cent. Legal services are more evident in the value premium space, representing 15 per cent of tenancies versus just 4 per cent of high-end and 3 per cent of mid-level premium space.

Interestingly, 100 per cent of high-end premium offices are located in buildings with sustainability certification such as LEED or BRREAM. However, the percentage of offices in buildings with wellness certification, such as WELL or Fitwel, is higher at mid-level — at 16 per cent versus just 8 per cent of high-end premises. Across the entire list of markets, 84 per cent of premium office spaces can be found in buildings with sustainability certification compared to 13 per cent with wellness certification, but JLL analysts suggest momentum is growing for the latter programs.

“Owners and occupiers are placing greater emphasis on healthy building credentials, which should lead to more certifications in the coming years,” the report posits.