An important consideration when launching a new business or relocating an established one is your projected overhead in terms of office space rental costs. A recent analysis by real estate research firm Reis Inc. broke down the costs of renting in major cities around the country, looking specifically at where rates are rising the fastest and where they are currently falling. The price growth in certain areas of the country has been driven primarily by companies in the energy and technology industries, which weren’t hit as hard by the recession and thus can afford to pay more money for their office space. Here is a breakdown of the top 5 places where rents have increased and decreased over the past year.
Cities with the Highest Increase in Current Office Rents
- San Francisco, California: Over the past year, San Francisco has seen a 7.2 percent cost increase. These days, the average price per square foot is $35.99.
- San Jose, California: While the cost increase isn’t quite as steep in San Jose, it still comes in at 4.6 percent, with $25.05 being the average price per square foot.
- New York, New York: Across the country, rates are also increasing. Office rents in the Big Apple have seen a 4.4 percent increase, with the average price per square foot a whopping $49.98.
- Houston, Texas: Down in Texas, Houston business owners have seen a 4 percent cost increase, with the average price per square foot coming in at $21.35.
- Dallas, Texas: The fifth highest office rent increase is also in Texas, with costs rising in Dallas 3.2 percent. Here, the average price per square foot is currently $15.62.
Cities with the Largest Decrease in Office Rents
- Chattanooga, Tennessee: In the past year, Chattanooga has seen a cost increase of -0.6 percent, with the current average price per square foot at $10.80.
- Long Island, New York: Unlike NYC, Long Island rental prices are much more reasonable, with a cost increase of -0.5 percent and $21.99 average price per square foot.
- Las Vegas, Nevada: Last year, Vegas’s office rental inflation rate was -0.2 percent, with an average price per square foot of $18.05.
- Columbia, South Carolina: Likewise, Columbia’s inflation rate was -0.2 percent for last year, with $12.43 per square foot average.
- San Bernardino/Riverside, California: The San Bernardino area was also at a -0.2 percent cost increase, with the average price per square foot at $17.04.
Interestingly, the average rate for office space in the second quarter of 2013 was $23.23 per square foot, which was a 2.1 percent increase over last year. This can end up translating to a significant increase in overhead, as a business owner renting a 1,500 square foot office would see an increase of $720 per month. Yet despite this, businesses are beginning to rent more office space, with the office vacancy rate dropping 0.3 percent in the past year.
Eha, Brian Patrick. “The Best and Worst U.S. Cities for Renting Office Space.” Young Entrepreneur (YE). 7/31/13.