Although leasing velocity and occupancy growth will decelerate, commercial real estate investment experts expect office to see incremental gains throughout 2017 and into 2018.

1. U.S. Office
Investment Outlook
Key insights
Q4 2016

2. Overview
Cautious optimism reemerges.
Despite overall U.S. investment volume declines in 2016, the office sector
sustained stable activity, reaching $143.0 billion in volume in the
fourth quarter.
Secondary market momentum also returned as investors
looked to diversify. While leasing velocity and occupancy growth
decelerated as the country nearly reached full employment in the fourth
quarter, we still expect office to see incremental growth throughout 2017
and e​​ven into 2018.

3. Top five trends moving into 2017

4. Leasing fundamentals
Near-full employment will lead to decelerated leasing velocity and
moderated occupancy growth.
Tech remains the primary​​ office demand driver, even as the industry faces a talent shortage, representing
24.4 percent of quarterly leasing nationally.

5. Investment volumes
​​​​​​​​​​​​​​​​​​​​Following a year of uncertainties, the office liquidity outlook is improving
for 2017.
While up 7.4 percent in the fourth quarter, year-to-date office investment sales are stable over 2015 levels with a modest 0.6-
percent decline at year-end​.
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Officeinvestmentsalevolumes(billionsof$US)
Q1 Q2 Q3 Q4

6. Portfolio transactions
Pent-up demand for scale and yield will benefit office investment into 2018.
After lagging throughout the cycle, investors are focusing more on large portfolio and entity-level transactions in 2017, which
are lagging prior cycle levels on average by $2.5 billion each quarter.
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
2002Q4
2003Q4
2004Q4
2005Q4
2006Q4
2007Q4
2008Q4
2009Q4
2010Q4
2011Q4
2012Q4
2013Q4
2014Q4
2015Q4
2016Q4
Quarterlyportfoliovolumes(billionsof$US)
Portfolio, excluding EOP-related portfolio EOP-related portfolios

7. Market diversification
As secondary market investment increases, outperformers emerge across CBDs
and suburbs.
Secondary markets accounted for nearly 50.0 percent of fourth quarter transactions,​ and Atlanta, Dallas and Philadelphia are
leading this activity, each seeing office volumes exceed $2.0 billion annually for the second consecutive year.
34%
20%
37% 37%
29%
34% 35%
41% 41%
27%
41%
49%
32% 34%
39%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2014
2015
2016
Transactionvolumesbymarkettype
Primary markets Secondary markets

8. Foreign investment
Foreign office investment stable at elevated levels.
​​The foreign acquirer landscape took a shift in full-year 2016, with German capital surpassing Canadian as the most active, and
Asian investors accounting for four of the 10 most active.​​​​
10.0%
11.4%
7.2%
10.7%
6.1%
15.2%
10.0%
11.9%
15.0%
13.5% 13.8%
12.3%
16.3% 16.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Foreignparticipation(asa%oftotalofficevolumes)
Foreignofficeinvestment(billionsof$US)

9. Foreign investment (continued)
Offshore office investment continues, with German and Asian buyers leading the
way.
Office continues to outperform peer sectors and at a sustained, structural pace relative to prior cycle: 16.0 percent of full-year
While most of this investment remains focused on primary markets like New York, Chicago and Los Angeles, multi-tenanted,
core assets in select secondary markets are seeing modest gains. 2016 acquisitions by offshore investors.

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us.jll.com
Contacts
Jonathan Geanakos
President, Americas Capital Markets
jon.geanakos@am.jll.com
Sean Coghlan
Director, U.S. Investor Research
sean.coghlan@am.jll.com
Download the U.S. Office Investment Outlook