The office vacancy rate plunged by 0.9% to 18.4% during the spring, and rental rates fell to levels more than 7% below those seen last year, according to BD+C Economist Jim Haughey. A number of large office markets, such as New York and San Francisco, saw vacancy levels reach 20%. Overall, net space rentals fell during the spring in every major office market except Pittsburgh.
Developers responded quickly to reduced profit prospects in the office market. Office construction spending expanded through September 2008 but has since declined 16.4% through June. Office project starts declined slowly in early 2009 and then dropped sharply in the last two months, with starts for June-July more than 50% below the average for the previous 18 months. These slow starts shrink the pipeline of work under way and assure a further 6% drop in monthly jobsite spending by next spring.
The 2009-10 office recession will be relatively mild compared to the recession earlier this decade when construction spending dropped 47% over 27 months. This time the expected decline is 22% over 19 months. Recession declines are approximately proportional to the rise in the preceding expansion period. The 2004-08 expansion in office construction was shorter and smaller than the overheated expansion that preceded the previous recession.
The good news is that three market niches show promise of relatively slight declines over the next year. Government office construction, which has so far fared worse than private development, is likely to reverse course when stimulus-funded buildings get started next year. Financial offices, a relatively small niche, appears to be past the worst of its recession, and job site spending has been stable in recent months after a 20% drop last year as a result of forced mergers by the Federal Reserve Bank and the FDIC. Lastly, office renovation projects show promise because they typically decline much less in a recession than does new office construction.
Related Stories
Market Data | May 10, 2022
Hybrid work could result in 20% less demand for office space
Global office demand could drop by between 10% and 20% as companies continue to develop policies around hybrid work arrangements, a Barclays analyst recently stated on CNBC.
Multifamily Housing | May 10, 2022
Multifamily rents up 14.3% in 2022
The average U.S. asking rent for multifamily housing increased $15 in April to an all-time high of $1,659, according to Yardi Matrix.
Headquarters | May 10, 2022
JPMorgan Chase’s new all-electric headquarters to have net-zero operational emissions
JPMorgan Chase’s recently unveiled plans for its new global headquarters building in New York City that is rife with impressive sustainability credentials.
Building Team | May 9, 2022
Cincinnati’s Andrew J Brady Music Center transforms the city’s riverfront
In Cincinnati, Ohio, the Andrew J Brady Music Center aims to connect audiences with live music while transforming Cincinnati’s riverfront.
Sponsored | Multifamily Housing | May 8, 2022
Choosing the right paver system for rooftop amenity spaces
This AIA course by Hoffmann Architects offers best practices for choosing the right paver system for rooftop amenity spaces in multifamily buildings.
Market Data | May 6, 2022
Nonresidential construction spending down 1% in March
National nonresidential construction spending was down 0.8% in March, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau.
Building Team | May 6, 2022
Atlanta’s largest adaptive reuse project features cross laminated timber
Global real estate investment and management firm Jamestown recently started construction on more than 700,000 sf of new live, work, and shop space at Ponce City Market.
Sponsored | BD+C University Course | May 5, 2022
Designing with architectural insulated metal wall panels
Insulated metal wall panels (IMPs) offer a sleek, modern, and lightweight envelope system that is highly customizable. This continuing education course explores the characteristics of insulated metal wall panels, including how they can offer a six-in-one design solution. Discussions also include design options, installation processes, code compliance, sustainability, and available warranties.
Higher Education | May 5, 2022
To keep pace with demand, higher ed will have to add 45,000 beds by year-end
The higher education residential sector will have to add 45,000 beds by the end of 2022 to keep pace with demand, according to a report by Humphreys & Partners Architects.
Legislation | May 4, 2022
Washington is first state to mandate all-electric heat for new large buildings
Washington recently became the first state to require all electric heat for new buildings.