Lifestyle Office Markets 2025

In the last decade, shifts in generational preferences in the U.S. have given rise to a new prototype for commercial real estate development. As Millennials and Gen Z workers have grown to form the majority of U.S. workers, expectations around workspace quality, and the supportive environment around office locations are gaining importance. Companies have been shown to achieve meaningful advantages for recruiting and retention when upgrading their offices to these highly-amenitized, vibrant Live-Work-Play districts that have emerged across most major markets. Lifestyle Markets—mixed-use regions that have curated a self-reinforcing ecosystem of diverse high-end property types with strong amenitization and walkability—have generated significant outperformance as a result, with offices leasing up more quickly at higher rental rates, and asset sales seeing more competitive buyer pools and elevated pricing.

The key behind Lifestyle Markets’ outperformance is the ability to create a vibrant, 24-hour, 365-day ecosystem. A proper mix of property types accomplishes this:

Office – drives weekday foot traffic and has spillover benefits for dining and hotels.

Housing – provides consistent daytime population after hours and on weekends.

Retail – creates daytime and evening activation and supports socialization opportunities across other property types.

Hotels – introduce out-of-town demand and accommodates larger populations for events.

Entertainment – drives higher levels of peak activation; extends nighttime/weekend activity levels

Green Space/Public Realm – generates identity and connectivity, improves dwell time

One apprehension that has slowed adoption of Lifestyle Markets from an investor or developer perspective has been the concept that Live – Work – Play districts were a short-lived trend dominated by younger generations. A 2023 survey from Gensler showed that roughly 75% of employees would attend the office more frequently if offered their “ideal experience mix,” with little variation across generations. Survey results indicated that average attendance company-wide would increase by 0.9 days per week under this scenario. A 2022 global survey from Steelcase also showed that employees who “like” their physical office space are 33% more engaged, 9% more productive, and 20% less likely to seek other jobs. In an economic environment where office rent costs are typically a fraction of what firms spend on employee salaries, the benefits of higher productivity, stronger retention and higher engagement provide a compelling value proposition for upgrading office space to Lifestyle Markets, despite rent premiums.

A significant benefit of developing Lifestyle ecosystems is faster lease-up and higher stabilization rates for office product (and likely other property types). Offices in Lifestyle markets see higher preleasing, delivering 76% leased compared to 70% for new offices in other environments; reach 90% leased twice as quickly as typical office development, and stabilize at nearly 5% higher occupancy levels overall.

Office tenants have demonstrated a strong willingness to pay premium rents to secure space in Lifestyle Markets, ascribing meaningful value to the location-based amenities and brand-building opportunities that vibrant neighborhoods provide. While previously dominated by technology and creative tenants, users across traditional industries including legal and finance are beginning to migrate to Lifestyle Markets as well and are generally responsible for the highest-rent leases in their respective markets. Importantly, Lifestyle Markets often lack the supertall skyscrapers that generate top-of-market rental rates—however, when normalized for floor height and location, they significantly outperform peer assets. In the last year, Lifestyle Market rents have generated a 32% premium compared to the Class A market, with an expanding spread against non-Lifestyle new construction over the past three years.

In the early 2010s, existing Lifestyle developments were largely viewed as localized successes that weren’t necessarily broadly scalable. Outside of some early adopters, most institutional capital remained focused on traditional “core” assets—within the context of office, typically meaning tall CBD towers. By the mid-to-late 2010s, generational preference for Live-Work-Play environments was becoming more evident, and a more diverse abundance of Lifestyle Markets began to emerge or be developed across gateway and secondary markets. Groups like Brookfield, Hines, JP Morgan and Blackstone became more involved in co-investing or developing Lifestyle Districts as proof of concept strengthened. In the late 2010s and since the pandemic, institutional investors have begun explicitly targeting Lifestyle assets, with some specifically fundraising or setting allocations for mixed-use assets. Historically, an increase of capital allocations from institutional sources is associated with accelerate price appreciation. 

Because of the elevated capital demand for Lifestyle Markets and the strong performance of offices in these contexts, pricing for Lifestyle office buildings has consistently generated a significant premium to traditional office sale—which has expanded in the wake of the pandemic. From 2017-2019, Lifestyle offices generated a 95-basis-point cap rate premium and priced 46% higher on a per-s.f. basis—since 2020 cap rate premiums have expanded to 111 bps and p.s.f. premiums have grown to 71%.

Elevated valuations provide several advantages to owners in addition to facilitated exit strategies and stronger outcomes: higher valuations enable greater access to capital in general for operating and upgrading the asset, facilitating capital outlays for leasing including buildout costs, and other capital improvement projects to enhance the leaseability of the asset.

As the next cycle of development unfolds, creating Lifestyle Markets and “lifestylizing” existing office markets will dominate new development activity. Since 2020, core CBD submarkets that are dominated by commercial uses and overrepresented by aging office buildings have underperformed significantly, while Lifestyle Markets have thrived. Reimagining CBDs as a self-reinforcing ecosystem rather than a unidimensional nexus of labor will incrementally increase the Lifestyle characteristics of core office hubs, helping to respond to today’s tenant desires. Amid limited office development generally, the vast majority of speculative development over the next decade will take place in new Lifestyle Markets or areas that already have established reputations as Live-Work-Play nodes.

Owners of a single office building or development site with limited additional land are unable to create cohesive master-planned districts, but they can still achieve leasing premiums and elevated occupancy by emulating the tactics of Lifestyle Markets. Vertical mixed-use developments in many markets have found success by curating unique environments and experiences within a single building, but even standalone offices can borrow similar strategies. Highly-amenitized offices, irrespective of age or surroundings, have remained resilient since 2020 while other offices shed significant occupancy. By upgrading a building’s outdoor spaces, food & beverage options, and shared spaces; or implementing experiential programming or convenience-targeted programs, landlords can tap into the growing demand for Lifestyle Office.

With development gravitating around Lifestyle product, and urban design evolving to create more destination ecosystems, the office market of the future will diverge from the utilitarian monoculture of the past. Suburban business parks are adding Lifestyle features through densification and mixed-use development, core CBDs are similarly diversifying with commercial-to-residential redevelopments, and master-planned developments are becoming more abundant as the value proposition is further proven in the market. As such, Lifestyle Office as a share of the U.S. office market is expected to grow nearly 10-fold by 2040, comprising 4% of inventory today but anticipated to form almost one-third of office product by 2040. As the office market continues to grapple with an oversupply of functionally obsolete space and an undersupply of differentiated, amenitized workplaces, the proliferation of Lifestyle Markets will be a critical process in balancing those pressures.