Millennials Drive Demand for Unique Amenities and Creative Office PropertiesAccording to the 2018 Philadelphia Creative Office Market Overview, the city shows a growing interest in creative office spaces.
Demand for more creative office spaces centers around a new generation of Millennial and Generation Z professionals: An influx of younger populations and flourishing tech sector competing for top talent are rejecting the traditional high-rises of their parents’ generation, opting for more unique and exciting workspaces.
Employers are seeking modern amenities to compete for the city’s knowledge-economy talent and appeal to the growing Millennial demographic with office spaces that reflect their corporate values. Meanwhile, landlords and investors see opportunities to meet this demand for similar or lower cost than a Center City high-rise, along with the near-premium rental rates and high-profile tenants this market tends to attract.
The findings reflect a national trend of creative office development. As a relative latecomer to the reinvestment seen in many U.S. cities, the Philadelphia market now sits in a sweet spot: rapidly gaining talent in a historic city full of highly convertible industrial buildings.
Rise of the Creative Office Space
- Repurposed industrial spaces
- High, loft-like ceilings
- Alternative building materials such as brick or timber
- Unique amenities, like operable garage doors and multi-purpose rooms
This property type often attracts TAMI occupants (technology, advertising, media, and information), but JLL Philadelphia defined the inventory based only on physical building attributes.
The report identifies nearly 5.9 million square feet of existing creative office product in Philadelphia—and just under 1 million square feet of additional space either proposed or under construction. The city is naturally suited to meet demand, with ample supply of architecturally distinctive buildings in walkable and transit-accessible locations.
Further, this niche real estate product can be achieved through conversions, renovations, or new construction. This allows developers to make use of a wide array of available inventory, whether in the traditional CBD or in growing pockets throughout the city.
Emerging Submarkets Support Creative Office Development
Two-thirds of the identified creative office inventory is located within the traditional CBD submarkets of Market Street East and Market Street West. This is due in large part to the decades-old conversions of the Wanamaker and Lit Brothers department stores, which were the first to adopt the high ceilings and unconventional materials that have become trademarks of the creative office aesthetic.
However, JLL Philadelphia identified nearly 2 million square feet of additional inventory within three emerging creative submarkets: North Philadelphia, Callowhill, and Riverwards.
The submarkets share several core characteristics that make them prime candidates for creative office development: industrial buildings, zoning changes, and accessibility to both the CBD and growing residential neighborhoods, making them convenient yet more affordable than traditional office spaces.
Prospective tenants don’t seem deterred by this diversity of placement throughout the city. In fact, this market segment values easy transit to the CBD, surrounding neighborhoods, and recreational districts over prime location within the city center.
Performance and Outlook for the Creative Office Market
Overall, vacancy in the Philadelphia creative office market stands at 13.9%, slightly weaker than traditional office spaces. However, performance varies drastically between established and emerging submarkets.
Shifting demographics, new business growth and national trends all suggest that the creative office market is here to stay. The proliferation of Millennial and Generation Z-influenced businesses, and with them a cultural push toward flexible, urban, and environmentally-conscious spaces, will likely continue to drive demand in the coming years.
The location of creative office spaces will depend less on proximity to the core CBD and more on unique and exciting properties and easy access to residential and recreational districts.
As for the best candidates for creative office conversion? Easily convertible industrial spaces within or adjacent to rapidly developing residential neighborhoods.
To learn more about the expanding creative office market in Philadelphia, read the full 2018 Philadelphia Creative Office Market Overview.