In 2024, regulation agency Sidley Austin and consulting large Deloitte each signed leases at 23Springs, a gleaming 26-story tower in Dallas’s Uptown submarket. The numbers seemed like acomeback story: common workplace rents within the metropolis have been rising.
They weren’t. Or slightly, the numbers didn’t imply what most individuals assumed they meant. And that hole between what headline lease information reveals and what tenants really pay is distorting choices made by mayors, lenders, and company actual property groups throughout the nation.
Conventional lease statistics reply a deceptively easy query: “What is the average rent per square foot among leases signed this quarter?” For many years, lease averages have been the very best measure of a rental market, shaping how economists, buyers, lenders, and policymakers perceive industrial, retail, and industrial markets. From how cities set property taxes to how lenders underwrite loans and the way corporations determine the place to develop or signal leases, these figures affect main choices.
A extra illuminating strategy – evaluating like with like in comparable areas, and accounting for the concessions for tenants in lease phrases – paints a unique image in Dallas. At greatest, workplace rents have stalled. That distinction issues: when enterprise leaders and policymakers depend on headline averages that make the market seem more healthy than it truly is, they might make choices primarily based on a distorted image of demand. Enterprise leaders deciding the place to develop or how a lot workplace house to hold are taking a look at numbers that don’t mirror the true price—or the true weak point—of the market.
This isn’t only a quirk in Dallas. It’s a nationwide measurement drawback.
Whereas lease averages can present a tough information to the market in common occasions, they usually fall quick – significantly throughout unprecedented occasions. Within the years following COVID‑19, they have been deceptive.
Why the Customary Metric Fails
There’s a couple of explanation why. First, these averages overlook who’s signing leases. Throughout and after the pandemic, many tenants gave up older, peripheral workplaces and upgraded to newer buildings in higher areas with higher amenities. These newer buildings charged extra lease, and this shift pushes the common up. This may be the case even when landlords in much less‑favored buildings are quietly chopping costs or sweetening phrases. Conventional metrics can’t inform the distinction between “rents are rising everywhere” and “more leases are being signed for top‑tier buildings.”
Second, lease averages ignore {that a} lease that appears costly on paper can really be very discounted in actuality. Landlords usually provide months of free lease, and plenty of pay for tenants to construct out their house. In Manhattan, for instance, the share of whole lease worth dedicated to tenant enchancment allowances roughly doubled within the decade earlier than COVID and has remained excessive. Free lease durations have expanded considerably previously few years. When normal metrics focus solely on the beginning lease worth, they’re ignoring the concessions that change the worth of the lease.
This issues as a result of dangerous information results in dangerous choices. For instance, a mayor who thinks workplace rents are rising could push by means of aggressive reassessments and better property taxes, solely to search out that the industrial actual property market is way weaker than what the numbers advised. A lender who underwrites loans on the idea of flattering averages could uncover too late that the collateral was overstated. Company actual property groups deciding whether or not to develop, relocate, or renegotiate leases might also misinterpret the true price and demand for house.
Industrial actual property sits on the middle of the monetary system. Workplace towers, buying facilities, and warehouses underpin billions of {dollars} in loans, municipal tax bases, and company steadiness sheets. When the metrics used to evaluate these markets are deceptive, the ripple results prolong effectively past landlords—to banks, buyers, cities, and the companies deciding the place to find and develop.
A New Approach to Measure the Market
To construct a clearer image of the workplace, industrial, and industrial markets, Columbia Enterprise Faculty and CompStak are collaborating on a brand new method to analyze publicly out there leases. The brand new Columbia CompStak Hire Index compares comparable areas in comparable areas over time and measures the online efficient lease tenants really pay, after accounting for concessions like free months and build-out allowances. It attracts lease, lease measurement and time period, concession buildings, constructing traits, and exact location from roughly a million detailed leases signed since 2010 throughout workplace, retail, and industrial properties in about 130 U.S. metropolitan areas. At every stage, the index controls for the steady options of the constructing and placement, and makes use of the remaining variation to indicate lease development or decline over time. By controlling for constructing traits and placement, the index isolates actual modifications in rents slightly than shifts by which buildings are leasing house.
What the Information Truly Reveals
When rents are analyzed by means of this index, the market seems to be very totally different. For instance, in Manhattan, high-rise buildings have landed eye‑catching leases. Common beginning rents in prime districts proceed to go up, and one can simply assume that workplace lease costs are lastly going up, after years of being battered by work‑from‑house. Nevertheless, the info by means of our index reveals that high quality‑adjusted workplace rents in Manhattan fell sharply throughout the pandemic. By mid‑2025 they’d solely simply clawed again to the place they began. Manhattan’s workplace market didn’t even flip the nook till the second half of 2025, when the standard‑adjusted rents jumped from about $71.60 per sq. foot within the second quarter to $83.30 within the fourth. The lease improve in top-tier buildings was nonetheless occurring however there have been many buildings struggling to fill house.
In retail too, when a significant flagship retailer indicators a spectacular lease in a premier buying district, uncooked lease averages leap. This makes it appear that the market is wholesome. But once we maintain high quality and placement fixed, the retail lease index reveals muted development over the past 15 years, with no sustained upward development. On the identical time, industrial actual property is definitely displaying an actual growth. The pandemic turbocharged demand for logistics house as households and companies leaned into on-line ordering and simply‑in‑time supply. In that sector, our fixed‑high quality index and the normal measures clearly be aware a powerful, nationwide surge in rents for warehouses, logistics hubs, and distribution facilities, which has not too long ago cooled a bit attributable to increased rates of interest and a wave of recent provide.
Industrial actual property has all the time been an opaque market the place rents are set in bilateral negotiations, recorded in non-public paperwork, and reported with delays. When analysts look solely on the lease averages, it’s straightforward to misinterpret the well being of the market and make coverage and funding choices on the incorrect foundation. For enterprise leaders, lenders, and policymakers, the lesson is easy: the headline lease numbers don’t inform the total story in regards to the industrial actual property market. Selections about funding, lending, tax coverage, or workplace technique ought to depend on information that displays what tenants really pay—not simply the averages that dominate right now’s market reviews.
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