JLL: Mixed-Use ‘Lifestyle Office Markets’ Defy Broader Office Market Challenges
(Illustrations courtesy of Kendall Hoopes via pexels.com)
Office properties in vibrant mixed-use districts are dramatically outperforming the rest of the U.S. office market, according to JLL, Chicago.
Post-pandemic demographic shifts and growing preferences for live-work-play environments help explain this shift, JLL said in its new Lifestyle Office Markets research report.
The report identifies lifestyle office markets as mixed-use regions that combine urban amenities with suburban accessibility, featuring moderate density, convenient transit options, diverse, high-end property types, strong amenities, walkability and 24/7 activity. Such properties currently comprise just 4% of U.S. office space, but JLL projects they will grow to 30% of the national office inventory by 2040 as both workers and businesses increasingly favor locations offering convenience, community, and experiences beyond just workspace.
“We are witnessing a structural shift in how the market values workplace environments, with massive implications for investors, developers and municipalities alike,” said Jeff Eckert, president of Americas office agency leasing at JLL. “As workplace strategies evolve, organizations are increasingly willing to pay a premium for location-based amenities that offer their employees authentic, engaging experiences that cannot be replicated through a screen. The future of office space is about creating environments where people genuinely want to be.”
Key Report Findings Include:
Superior leasing performance: Office properties in lifestyle office markets command a 32% rent premium over other Class A office space, lease up twice as fast (90% leased in two years versus four years for traditional developments) and maintain significantly lower vacancy rates (12.5% compared to 22.5% for the overall office market), JLL reported.
Institutional investor momentum: Institutional capital allocation to office properties in lifestyle office markets has grown from “minimal” levels before 2015 to more than 8% of institutional office acquisition volume nationwide in 2024, the report said.
Popular location-based amenities: Location-based office amenities compound rent premiums, with top features like sports and entertainment venues (+313 basis points), waterfront locations (+284 basis points) and green space (+180 basis points) providing measurable value enhancements.
Market transformation strategy: Both traditional urban cores and suburban business parks are incorporating “lifestylization” initiatives as part of revitalization efforts by upgrading properties, increasing the diversity of property types and adding amenities like dining, entertainment and greenspace, JLL said.
JLL Senior Manager of U.S. Office Research Jacob Rowden noted the pandemic and the subsequent “push and pull” of remote work awakened office tenants to the reality that experience and environment are crucial for attracting and retaining talent. “Companies are flocking to vibrant, mixed-use areas with synergies among diverse property types that create a sense of energy and engagement,” he said. “As office tenants prioritize these areas and cities reimagine one-dimensional business districts, dynamic Lifestyle Market nodes represent the office market of the future.”
