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
| May 31, 2012
Day & Zimmermann taps Jobe for ECM VP
Ken Jobe, a senior executive with 30+ years of industry-related experience, joins Day & Zimmermann to expand footprint in the process & industrial markets.
| May 31, 2012
Perkins+Will-designed engineering building at University of Buffalo opens
Clad in glass and copper-colored panels, the three-story building thrusts outward from the core of the campus to establish a new identity for the School of Engineering and Applied Sciences and the campus at large.
| May 30, 2012
Construction milestone reached for $1B expansion of San Diego International Airport
Components of the $9-million structural concrete construction phase included a 700-foot-long, below-grade baggage-handling tunnel; metal decks covered in poured-in-place concrete; slab-on-grade for the new terminal; and 10 exterior architectural columns––each 56-feet tall and erected at a 14-degree angle.
| May 30, 2012
Pringle Brandon in discussions to join forces with Perkins+Will
The London offices would be known as Pringle Brandon Perkins+Will.
| May 30, 2012
Boral Bricks announces winners of “Live.Work.Learn” student architecture contest
Eun Grace Ko, a student at the Ryerson University in Toronto, Canada, named winner of annual contest.
| May 29, 2012
Reconstruction Awards Entry Information
Download a PDF of the Entry Information at the bottom of this page.
| May 29, 2012
AIA expands Documents-On-Demand service??
Six new documents added, DOD offers nearly 100 contract documents.
| May 29, 2012
Thornton Tomasetti/Fore Solutions provides consulting for Phase I of Acadia Gateway Center
Project receives LEED Gold certification.
| May 24, 2012
2012 Reconstruction Awards Entry Form
Download a PDF of the Entry Form at the bottom of this page.