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
| Jun 16, 2014
6 U.S. cities at the forefront of innovation districts
A new Brookings Institution study records the emergence of “competitive places that are also cool spaces.”
| Jun 12, 2014
Tod Williams Billie Tsien Architects' design selected for new UCSC facility
The planned site is a natural landscape among redwood trees with views over Monterey Bay, a site that the architects have called “one of the most beautiful they have ever worked on.”
| Jun 12, 2014
Austrian university develops 'inflatable' concrete dome method
Constructing a concrete dome is a costly process, but this may change soon. A team from the Vienna University of Technology has developed a method that allows concrete domes to form with the use of air and steel cables instead of expensive, timber supporting structures.
| Jun 11, 2014
Bill signing signals approval to revitalize New Orleans’ convention center corridor
A plan to revitalize New Orleans' Convention Center moves forward after Louisiana governor signs bill.
| Jun 11, 2014
5 ways Herman Miller's new office concept rethinks the traditional workplace
Today's technologies allow us to work anywhere. So why come to an office at all? Herman Miller has an answer.
| Jun 10, 2014
Built-in balcony: New skylight windows can fold out to create a patio
Roof window manufacturer Fakro offers a skylight window system that quickly converts into an open-air balcony.
| Jun 9, 2014
Green Building Initiative launches Green Globes for Sustainable Interiors program
The new program focuses exclusively on the sustainable design and construction of interior spaces in nonresidential buildings and can be pursued by both building owners and individual lessees of commercial spaces.
Smart Buildings | Jun 8, 2014
Big Data: How one city took control of its facility assets with data
Over the past few years, Buffalo has developed a cutting-edge facility management program to ensure it's utilizing its facilities and operations as efficiently, effectively, and sustainably as possible.
| Jun 6, 2014
KPF, Kevin Roche unveil design for 51-story Hudson Yards tower in NYC [slideshow]
Related Companies and Oxford Properties Group are teaming to develop Fifty Five Hudson Yards, the latest addition to the commercial office tower collection in the 28-acre Hudson Yards development—the largest private real estate development in the history of the U.S.
| Jun 3, 2014
Libeskind's latest skyscraper breaks ground in the Philippines
The Century Spire, Daniel Libeskind's latest project, has just broken ground in Century City, southwest of Manila. It is meant to accommodate apartments and offices.
