Snapshots

High-rise availabilities becoming exceptionally rare in most markets

December 11, 2023

Contributors:

As new development becomes scarce over the next several years, some portions of the office market will see more intense supply pressures driven by relative scarcity and resilient demand – one such segment is high-rise availabilities, which in most markets already carry a significantly lower vacancy rate than the overall office market.

The rarity of high-rise or skyscraper buildings nationally, coupled with the tendency of taller buildings to taper to smaller floor plates at higher floors, results in the vast majority of office inventory in the U.S. sitting in lower floors of buildings: 66% of all office space sits on floors 1-5, while 1% of inventory sits on the 40^th floor or higher.

Despite over 20% vacancy rates for office space nationally, suites on floors 20 and above have just a 12.4% vacancy rate nationally, when excluding New York City.

The advantage that tall buildings have at generating views and natural light penetration drives heightened demand, even for older-vintage assets: the Empire State Building is currently 90.2% occupied, and the Willis Tower in Chicago is currently 87.0% occupied despite over 20% vacancy in Chicago. Taller buildings also tend to be developed in ultra-core urban locations, and often have architectural significance which can also boost demand.

The development pipeline will offer little relief for limited high-rise availabilities over the medium term: of the 253 buildings that remain under construction nationally, just 12 are planned to be 30 stories or above, and among those at least six have fully pre-leased their high-rise floors.

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