When setting up an independent advisory practice, office rent is one of the first things a financial advisor should take into account. And rents are going up across the country.
“Coming out of the recession where you had vacancy and occupancy rates at very, very low levels and you had concessions being offered by landlords, now you’re looking at very high occupancy ratios for prime real estate properties,” said Patrick Jinks, director of practice planning and acquisitions at Raymond James Financial Services. "This is all geographically driven.”
For an advisor, the rent on office space is one of the costs that is not necessarily fixed, Jinks said. But it is controllable because you can estimate it early on.
“You can control it by signing a lease that is of a period of time where your rate is fixed, and then can also have a right to renew,” Jinks said.
Jones Lang LaSalle has recently put together a list of the most expensive streets for office rents, and the list skews heavily toward gateway cities on both coasts.
But don’t assume you know which streets are the most expensive—the study does provide some surprising insights into current conditions of office rents.
For an in-depth look at the most desirable office locations, click through our slideshow.
1. 1. Sand Hill Road, Menlo Park, Calif., $111.00 per sq. ft.
In spite of what you might think, the most expensive office space in the U.S. right now is not located in New York City, but on Sand Hill Road in Menlo Park, Calif. Office rents on Sand Hill Road currently average $110.76 per sq. ft., and for prime space, they are even higher, at $126.00 per sq. ft. Unlike most other streets on the Top 10 list, however, the office sector here has been losing momentum, with average rents dropping 2.5 percent since the last time JLL did this study in 2011.
2. 2. Fifth Avenue, Midtown Manhattan, NYC, $102.00 per sq. ft.
Fifth Avenue in New York City claimed the number two spot, with average rents of $102.02 per sq. ft. The best office spaces on the street are currently more expensive than anywhere else in the country, however, priced at $141.00 per sq. ft. And the market keeps getting stronger, with a 5 percent increase in rents since 2011.
3. 3. University Avenue, Silicon Valley, Calif., $95.00 per sq. ft.
Next up is University Avenue in Silicon Valley, Calif., where office rents average $94.92 per sq. ft. Prime office spaces on University Avenue go for $93.00 per sq. ft. The street also registered a healthy uptick in office rents over the past two years, at 14.1 percent.
4. 4. Greenwich Avenue, Greenwich, Conn., $93.00 p.s.f.
Greenwich Avenue in Greenwich, Conn. remains in demand, with office rents on the street averaging $92.96 per sq. ft. For class-A plus space in this New York tri-state area market, tenants are willing to pay as much as $100.00 per sq. ft. Over the past two years, office rents on Greenwich Avenue have gone up 3.4 percent.
5. 5. Pennsylvania Avenue, Washington, DC $76.00 per sq. ft.
Pennsylvania Avenue in Washington, D.C. did experience a 5.5 percent drop in average rents since 2011, but it still made the Top 5, with average office rents of $75.83 per sq. ft. Prime space on the street currently goes for $83.00 per sq. ft.
6. 6. California Street, San Francisco: $62.10 per sq. ft.
Another outperformer has been California Street in San Francisco. Not only did it take the number six spot, with average rents of $62.10 per sq. ft., it registered a 43.9 percent increase in rents over the past two years. Prime office space on California Street is renting at $95 per sq. ft.
7. 7. Boylston Street, Boston: $60.20 per sq. ft.
On Boylston Street in Boston, office rents currently average $60.20 per sq. ft. Rents for class-A plus space average $70.22 per sq. ft. Boylston Street experienced a 14.3 percent uptick in average office rents from 2011 to 2013.
8. 8. Avenue of the Stars, Los Angeles: $60.12 per sq. ft.
Office space on Avenue of the Stars in Los Angeles boasts average rents of $60.12 per sq. ft. for “regular” buildings and $66.00 per sq. ft. for top notch real estate. Rents on the street went up 1.9 percent since 2011.
9. 9. Royal Palm Way, West Palm Beach: $58.52 per sq. ft.
Royal Palm Way in West Palm Beach, Fla. has benefited from a heavy presence of wealth management and financial services firms, with average rents increasing 0.9 percent over the past two years. Rents on Royal Palm Way currently average $58.52 per sq. ft. for all office spaces, and $70.75 per sq. ft. for the most luxurious buildings.
10. 10. Newport Center Drive, Orange County $50.06 per sq. ft.
Rounding up the Top 10 is Newport Center Drive in Orange County, Calif. The street boasts average rents of $50.0.06 per sq. ft., with top space leasing for $54.00 per sq. ft. on average. Office rents here have gone up 4.3 percent over the past two years.