In Some Cities, the Price Is Right For Downtown Office Space

According to the WSJ, Office tenants in cities ranging from New York to Los Angeles are willing to pay more in rent to be located in the central business districts, or CBDs, according to a new study by Richards Barry Joyce & Partners LLC. But a CBD location can be a bargain in other cities such as St. Louis and Detroit, where suburban offices command higher rates.

Cities with more sluggish markets, such as Detroit and St. Louis, could be expected to have lower downtown rents. They are joined by at least one city that doesn't fit the mold: Phoenix. Its downtown has rental rates 12% lower on average than its suburban neighbors, even though it is a fast-expanding area where jobs in office-using industries such as financial services are on pace to increase 5.3% in 2006, according to Moody's Economy.com.

Phoenix's dependency on autos for commuting is one reason. Suburban office buildings can get higher rental rates because they often offer more parking, says Jeff Hartland, senior vice president for Grubb & Ellis/BRE Commercial LLC in Phoenix. He predicts the city's central business district discount may fade since space has tightened substantially in the Downtown South area, particularly with Arizona State University's expansion there.

The other factor holding back downtown Phoenix and it's seemingly never ending desire to bring more people back to it's downtown, vertical living community: IT'S VERY HOT IN THE SUMMER WHICH LASTS ABOUT 5+ MONTHS. Downtown urban living (in any city) is about walking around and the only "walking around" people want to do during the 5 months when it's over 100+ is to the pool! Otherwise they stay inside. Now, fix that and we're home free.

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