November 29, 2023

United States Office Space Rental Prices 2024

As the world gradually transitions back to normalcy after the pandemic, there is significant uncertainty surrounding various sectors, particularly the real estate industry. With the shift towards freelance and remote work, many workers have embraced the flexibility of completing tasks online, free from the constraints of a traditional office setting. However, for those still requiring physical office space, the question of rental prices in the coming years becomes a critical consideration. This comprehensive blog post will delve into the intriguing trend of office space rental prices in the United States and provide valuable insights into what you can expect in 2024. So, let's embark on this informative journey together and uncover the fascinating dynamics of the evolving office rental market!

Current Report By JLL

According to a recent report by JLL, the average office space rental price in the United States has steadily increased for the past few years. In 2019, the average rent per square foot was $32.14; in 2020, it rose to $33.25. However, with the onset of the COVID-19 pandemic and its subsequent effects on the economy, there was a slight dip in rental prices in 2021, with an average rental cost per square foot of $30.15. This decline can be attributed to the shift towards remote work and the temporary slowdown in business activities.

As the economy recovers and businesses reopen their physical offices, experts predict that rental prices will gradually increase in the coming years. This can be attributed to the pent-up demand for office spaces as companies seek to resume operations and establish a sense of normalcy. Furthermore, factors such as inflation, construction costs, and market dynamics will also influence the future trajectory of rental prices.

In addition to the factors above, other considerations to the future trend of office space rental costs. For instance, the location of the office space plays a significant role in determining rental prices. Prime locations in major cities often command higher rental rates due to the proximity to business districts, transportation hubs, and amenities. On the other hand, office spaces in suburban areas may offer more affordable options for businesses looking to reduce costs while maintaining a physical presence.

Moreover, the size and layout of the office space can also impact the rental price. Larger rooms with more amenities and flexible arrangements may come at a premium, while smaller and more basic office spaces may be more affordable. Companies must carefully consider their specific needs and budget when selecting an office space that aligns with their requirements and growth plans.

In conclusion, while there was a temporary decline in rental prices during the pandemic, the overall trend indicates a steady increase in office space rental costs over time. As businesses adapt to the new normal and the economy recovers, rental prices are expected to continue to rise, reflecting the ongoing demand for quality office spaces in the United States. Factors such as location, size, and layout will continue to shape the rental market, and businesses must carefully analyze their options to make informed decisions about their office space needs.

Location

One of the critical factors that significantly impact office rental prices is the location of the space. According to the JLL report, vibrant cities like San Francisco, New York City, and Boston command some of the highest rental prices, from $70 to $111 per square foot. With their thriving economies and sought-after business districts, these bustling metropolises are magnets for companies seeking prime office space.

On the other hand, cities like Dallas, Phoenix, and Tampa offer more affordable rental prices, ranging from $20 to $27 per square foot. These cities provide attractive options for businesses looking to establish a presence without breaking the bank. With their growing economies and developing business ecosystems, they offer a conducive environment for startups and small businesses to thrive. Additionally, affordable office spaces allow companies to allocate their resources toward other aspects of their operations, such as hiring and innovation.

Looking ahead to 2024, based on current market trends and economic forecasts, it is projected that San Francisco will continue to lead the pack, with rental prices expected to reach an astounding $130 per square foot. This reflects the high demand for commercial space in this bustling city, driven by the presence of major tech companies and a vibrant startup ecosystem.

On the other end of the spectrum, cities like Raleigh and Indianapolis are anticipated to offer more budget-friendly options for businesses looking to establish their presence. With rental prices ranging from $22 to $23 per square foot, these cities provide attractive opportunities for startups and small businesses to thrive without breaking the bank.

These projections reflect the ongoing dynamics of the real estate market but also the evolving preferences of businesses. As the landscape of industries and working models continues to evolve, companies seek flexible and cost-effective solutions, making these projections crucial in understanding the future of commercial real estate.

Regional Variances in Office Rental Costs

East Coast vs. West Coast

In the middle range, cities such as Austin and Denver are projected to see their office rental prices increase moderately. In Austin, rental costs are expected to reach an average of $50 per square foot, while Denver's rates will likely average around $45 per square foot in 2024.

These figures underline the diversity of the commercial real estate market across different regions, reflecting the varying degrees of economic development, business ecosystems, and demand for commercial spaces. Another factor that can significantly impact office rental costs is whether the room is in an urban or suburban area. Urban areas, such as downtown city centers, tend to have higher rental costs due to their proximity to businesses and amenities. On the other hand, suburban areas typically have lower rental costs due to their more spread-out nature. However, with the rise of remote working and flexible work arrangements, there has been a shift in demand for office spaces in urban vs. suburban areas. As more companies and employees embrace remote work, there has been a decrease in demand for urban office spaces and an increase in demand for suburban spaces. This shift can also be attributed to lower rental costs, more space for social distancing measures, and outdoor access. As a result, it is essential for businesses considering office rental costs to carefully consider their needs and the potential impact of location on those costs.

Urban vs. Suburban Areas:  The Impact on Office Rental Costs

In addition to economic development and business ecosystems, location plays a significant role in determining office rental costs. As mentioned earlier, urban areas generally have higher rental prices than suburban areas due to their proximity to businesses and amenities.

However, with the rise of remote work and flexible work arrangements, there has been a shift in demand for office spaces in urban vs. suburban areas. As more companies embrace remote work and employees seek a better work-life balance, there has been an increase in demand for office spaces outside of traditional city centers.

One major factor influencing this shift is the lower rental costs in suburban areas than in urban areas. This can appeal to small businesses or startups looking to save on expenses.   Additionally, suburban areas often offer more space for social distancing measures, a crucial consideration in the current pandemic.

Moreover, suburban areas provide access to outdoor spaces, which can benefit employees, such as improved mental and physical health, increased productivity, and creativity. This is especially important in light of the ongoing pandemic and the need for safe working environments.

Furthermore, suburban areas may also have lower operating costs and taxes, making them a more attractive option for businesses looking to cut costs. This can be especially beneficial for small businesses or startups with limited resources.

However, it's essential for businesses to carefully assess their needs and the potential impact of location on their operations before deciding between urban vs. suburban areas. While rental costs may be lower in suburban areas,  they may also lack the infrastructure and amenities crucial for specific industries. Additionally, the workforce in suburban areas may have different skill sets and backgrounds compared to urban areas, which could affect a company's hiring decisions.

According to the research conducted by the Global Workspace Association, there has been a significant 7.2% increase in the demand for suburban office spaces in the last year. This trend is driven by various factors, including the desire for a more relaxed and less crowded work environment.

A study from the Urban Land Institute reveals that rental costs in suburban areas are, on average, 25% less than in urban areas. This lower cost can translate into substantial savings for small businesses, making it an attractive option for startups and growing companies. For example, a startup leasing a 2,000-square-foot office could save up to $10,000 per year by choosing a suburban location. These savings could be reinvested in other business areas, such as hiring new talent or investing in technology.

Furthermore, a survey by the American Psychological Association has indicated that employees with access to outdoor spaces report a 23% higher level of workplace satisfaction and productivity. Suburban office spaces often provide more opportunities for green areas and outdoor amenities, allowing employees to have a better work-life balance and enjoy the benefits of nature during their breaks. This increased satisfaction and productivity can have a positive impact on the overall performance of a business.

These numbers underline the potential benefits of choosing suburban locations for office spaces. Not only can it lead to cost savings, but it can also create a more pleasant and productive work environment for employees. As the demand for suburban office spaces continues to rise, it is worth considering the advantages it can bring to businesses of all sizes.

Type of Services

Another significant factor influencing office rental prices is the type of office space and its amenities. For instance, shared spaces and coworking environments often provide more cost-effective alternatives to exclusive office spaces. These shared spaces foster a sense of collaboration and community, with opportunities for networking and knowledge sharing among professionals from different industries.

In 2024, exclusive office spaces are expected to command higher rental prices, ranging from $77 to $178 per square foot. This reflects the premium nature of these dedicated workspaces, which often offer state-of-the-art facilities, personalized services, and a prestigious business address. They are designed to cater to the needs of established corporations and high-profile organizations.

On the other hand, shared spaces and coworking facilities are projected to have lower rental prices, ranging from $17 to $55 per square foot. These flexible workspaces appeal to freelancers, startups, and small businesses seeking agility, scalability, and cost savings. Their vibrant and dynamic environments provide a platform for collaboration, innovation, and cross-pollination of ideas.

Overall, the choice of office space depends on businesses' specific requirements and preferences. Exclusive office spaces offer privacy, prestige, and a dedicated working environment, while shared spaces and coworking facilities provide flexibility, affordability, and opportunities for networking and collaboration.

Furthermore, there has been a discernible shift in the demand for office spaces with additional amenities that enhance the overall working environment. Features like in-built gyms, game rooms, cafes, and lounge areas have gained popularity as they contribute to employee well-being, collaboration, and productivity. This growing demand for amenities has inevitably led to increased rental prices. By 2024, office spaces offering these desirable amenities will demand higher rental prices, ranging from $70 to $140 per square foot. On the other hand, office spaces without such amenities are expected to have lower rental prices ranging from $20 to $60 per square foot, appealing to businesses with more modest needs and budget constraints.

In summary, various factors come into play when determining office rental prices. Location, type of office space, amenities, and even the availability of additional services such as parking or proximity to public transportation all play crucial roles in shaping the rental landscape. Businesses must carefully consider these factors to make informed decisions that align with their budget, operational requirements, and growth objectives. By understanding the nuances of the rental market, businesses can navigate the landscape effectively and secure the ideal office space for their needs.

Economic Factors Impacting US Office Rental Prices & Rates 2024

As we approach 2024, several changes are anticipated in the US office rental markethis is due to many economic factors impacting office rental prices and rates. This section will discuss some of these factors and their potential effects on the US office rental market.

1. Economic Growth

One of the primary factors influencing office rental prices and rates is the economy's overall health. When the economy experiences robust growth, businesses are often eager to lease or expand their office spaces, creating a surge in demand for office rentals. Conversely, during periods of sluggish economic growth, the need for office spaces may decline, resulting in lower rental prices.

Given the current outlook, industry experts anticipate that the United States economy will continue to flourish steadily over the next few years. This projected growth is expected to impact office rental prices and rates positively. With a thriving economy, businesses will likely gain more confidence in expanding their operations, leading to increased demand for office spaces and subsequently driving up rental prices.

This optimistic economic forecast bodes well for the office rental market, as the positive momentum in the economy sets the stage for a buoyant and dynamic environment. As businesses thrive and seek to accommodate their growing needs, the demand for office spaces will likely remain robust, reinforcing the upward trajectory of rental prices and rates in the foreseeable future.

2. Supply and Demand

The concept of supply and demand plays a crucial role in determining office rental prices and rates. Prices tend to rise when there is an increase in demand for office spaces and a limited supply. On the other hand, if there is an oversupply of office spaces and a decrease in demand, prices will likely fall.

Looking ahead to the coming years, there is expected to be a higher demand for flexible office spaces as remote work becomes more prevalent. This shift in work dynamics, driven by technological advancements and changing work culture, has led to an increasing number of professionals seeking flexible and adaptable work environments.

As the demand for flexible office spaces rises, smaller, shared offices that offer agility and convenience are likely to experience an increase in prices. These spaces cater to the needs of freelancers, startups, and remote workers who value the flexibility to choose when and where they work. With the rise in popularity of coworking spaces and shared workspaces, the demand for these smaller office setups is expected to grow, potentially leading to an upward trend in rental prices.

Conversely, traditional larger office spaces may experience a decline in demand as more companies opt for remote work options or embrace flexible work arrangements. The need for extensive office spaces may diminish, resulting in a decrease in order and, therefore, lower rental prices for these conventional setups.

Overall, the dynamics of the office rental market are subject to the forces of supply and demand and the evolving needs and preferences of professionals. As remote work continues to shape the future of work, the demand for flexible office spaces is likely to rise, creating both challenges and opportunities for the office rental market.

3. Inflation

Inflation, as a critical factor, has a significant impact on office rental prices and rates. During times of high inflation, the operating costs of office spaces tend to increase, resulting in higher rental prices. Conversely, rental fees may remain stable or even decrease in periods of low inflation. This dynamic nature of rental fees is closely tied to the fluctuating inflation rates.

It is anticipated that inflation will maintain a relatively steady trajectory in the forthcoming years. However, it is worth noting that unforeseen changes in the economy or global events have the potential to influence inflation rates. Consequently, these fluctuations in inflation rates could subsequently impact office rental prices and rates. Businesses and individuals in the real estate market must stay vigilant and adapt to any changes in the economic landscape to make informed decisions regarding office rentals.

What is the Cost of Office Space Per Square Foot?

The cost of office space per square foot can vary significantly based on various factors. One of the primary factors is location, with bustling urban centers like New York or San Francisco commanding higher prices, often exceeding $70 per square foot. Businesses benefit from proximity to key markets and a vibrant business ecosystem in these prime locations.

On the other hand, in smaller towns or suburban areas, the cost of office space could be relatively lower, ranging from $10 to $20 per square foot. While these areas may have fewer amenities and a smaller talent pool, they offer a more affordable option for businesses looking to establish a presence without breaking the bank.

Aside from location, the amenities and type of lease also influence the pricing. Modern buildings with state-of-the-art facilities and services tend to have a higher price tag. These buildings often offer flexible workspaces, communal areas, and advanced technology infrastructure, which can enhance productivity and collaboration.

Additionally, the condition and age of the building can be a factor in determining the cost of office space. Older buildings may have lower rental rates due to maintenance and renovation requirements, while newer buildings may command higher prices due to their modern design and energy-efficient features. Proximity to public transportation is another consideration, with offices near transportation hubs often having higher demand and, thus, higher prices.

When planning for office space, it's crucial to consider these factors and incorporate them into your budget. By carefully evaluating the location, amenities, lease terms, and transportation access, businesses can make informed decisions and find a suitable office space that meets their requirements and aligns with their financial goals.

Conclusion

In conclusion, office space rental prices in the United States indicate a consistent and gradual increase, with expectations of further upward movement in the coming years. Various factors, such as location, type of office space, and available amenities, play a crucial role in determining the cost of renting an office space.

You can stay updated with the current prices of our dedicated desks, private offices, coworking spaces and virtual offices in Hermosa Beach, El Segundo, and Manhattan Beach by following their respective pages. Feel free to contact us to explore these areas and discover their exciting opportunities. Don't miss out on the chance to experience these locations' vibrant atmosphere, stunning beaches, and thriving business communities!

As a freelancer, remote worker, or business owner searching for an office space, it is essential to conduct thorough research to explore the diverse options available in the market and understand their associated costs. By understanding the trend of office space rental prices, you can make an informed decision and anticipate what to expect in 2024, ensuring that your choice aligns with your budget and requirements for a productive and comfortable workspace.

Return to Unità Blog Home Page