As the U.S. economy adds jobs, office landlords are adding tenants — but the landscape for how and where we work has changed fundamentally in the last decade. Technology makes offices less necessary for some workers, leading to shared office spaces in some companies to maximize wasted desks. Younger workers are also demanding more creative, healthy office environments with every added convenience.
Investors in the office market have always focused on location, but now location shares importance with industry and competition, according to JLL, a professional services and investment management firm specializing in real estate. JLL ranked the top 10 most expensive streets, which win in all three of these categories.
Tech, life sciences and education "steer the ship," according to the report. That is why three of the top five spots are in northern California.
"Walk down Hamilton Avenue and you'll see it's lined with tech companies and venture capital/private equity firms — it really is at the center of the Silicon Valley world," said Hugh Scott, managing director with JLL's Tenant Representation.
Competition is all about amenities. Millennials are automobile-averse and crave walkability. Therefore, tenants demand restaurants, retail, entertainment and residential areas all within walking distance to the office. They want environmentally healthy buildings with the most modern technologies available, and they're willing to pay top dollar for it.
Take a look at where location, industry and competition are adding up to mega-price-tags for office space.
—By CNBC's Diana Olick and Stephanie Dhue
Posted 2015 November 17
Average rent per square foot: $51.72
A 1.3-mile ring that overlooks the Pacific Ocean, Newport Center Drive in Newport Beach, California, clocks in tenth place, commanding an 81 percent premium over other space in the area. Limited new development is expected to drive rents higher.
Average rent per square foot: $58.07
A high concentration of wealth management and financial services firms give Royal Palm Way its "Banker's Row" reputation. Office rents go for a 95 percent premium.
Average rent per square foot: $63.12
Rents are up 5 percent in the past two years on Avenue of the Stars as legal, financial and entertainment firms cluster there.
Average rent per square foot: $67.44
Boylston runs through two of Boston's most famous areas: Back Bay and the Financial District. Rents on Boylston rose 1.3 times faster than the other cities' most expensive streets.
Average rent per square foot: $72.65
Home to presidents, 1600 Pennsylvania Ave. is arguably the most famous address in America. Rents in nearby buildings are nearly double the market average. Redevelopment of the Federal Bureau of Investigation headquarters and Old Post Office is pending.
Average price per square foot $89.58
Also a first in the top 10, Mission Street in San Francisco is booming with the city. Salesforce.com headquarters is gobbling up this 61-story tower now under construction adjacent the company's current offices.
Average rent per square foot: $90.25
As a traditional hub for hedge funds and financial services with close proximity to transit, Greenwich Avenue has the ability to get 184 percent premium to the market.
Average rent per square foot: $119.27
The only New York street to crack the top 10, Fifth Avenue dropped from second to third, but still commands a 69 percent premium.
Average rent per square foot: $124.44
Palo Alto's Hamilton Avenue broke into JLL's top 10 list for the first time this year, with high tech and VC demand driving up office rent prices to command a 199 percent premium.
Average rent per square foot: $141.60
Some call it "Wall Street of the West," Sand Hill Road in Menlo Park, California, has the most expensive office rents in the U.S., according to JLL.