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
| Aug 11, 2010
Project is music to school's ears
Florida Gulf Coast University is building a $7.55 million Fine Arts Building on its campus near Ft. Myers, Fla. The 25,000-sf building—the first project in the school's plan for an entire music complex—will house the music program of the College of Arts and Sciences. The facility includes a 200-seat recital hall, rehearsal hall, music labs, studio rooms, and administration offices.
| Aug 11, 2010
East meets West in hospital design
The Los Angeles office of HMC Architects and the Chinese firm Shunde Architectural Design Institute won the commission to design the 2.15 million-sf First People's Hospital in the Shunde District of Foshan, China. The team's winning concept organizes a series of buildings around a dynamic, curved spine element to create an interior “eco-atrium” with outdoor green space and healing g...
| Aug 11, 2010
Voting center redesigned where it counts
A series of large-scale photographic banners by artist Rebeca Mendez soars above the newly redesigned Los Angeles County Elections Operations Center. L.A.-based Lehrer Architects completely reworked the 110,000-sf concrete warehouse, adding a new floor plan that improves work flow, bold colors, 12-foot-high dividing walls, and original artwork to create a vibrant and people-friendly environment.
| Aug 11, 2010
New pavilion planned for famous boulevard
Located in a prime spot along Santa Monica Boulevard in the Westwood neighborhood of Los Angeles, the Santa Monica Pavilion will have 9,000 sf of retail space, 35,500 sf of office space, and two below-grade parking levels when it opens in late 2010. The $10 million, three-story building extends a full length of the block to create a window wall of blue-gray translucent, fritted glass panels ove...
| Aug 11, 2010
Luxury high-rise meets major milestone
A topping off ceremony was held in late October for 400 Fifth Avenue, a 57,000-sf high-rise that includes a 214-room luxury hotel and 190 high-end residential condominiums. Developed by Bizzi & Partners Development and designed by Gwathmey Siegel & Associates Architects, the 60-story tower in midtown Manhattan sits atop a smaller-scale 10-story base, which creates a street façade t...
| Aug 11, 2010
New building focuses on public safety
The $40 million public safety building for the city of El Cajon, Calif., is under construction and slated for completion in June 2011. The five-story, 119,400-sf building will house the city’s administrative offices, a joint police and fire emergency operations center, central data center, indoor firing range, crime lab, and short-term custody facility.
| Aug 11, 2010
MOB added to new hospital project
A late-2009 ground breaking is planned for a $20 million medical office building on the grounds of the $211 million, 106-bed Loma Linda University Medical Center in Murrieta, Calif., which itself is under construction. Minneapolis-based Frauenshuh HealthCare Real Estate Solutions is developing the five-story, 160,000-sf MOB, which will accommodate 60 physician offices.
| Aug 11, 2010
Firm goes for Gold with office design
DLR Group is designing its new Omaha, Neb., headquarters to achieve LEED Gold. Sustainable features being incorporated into the three-story, 39,000-sf building, which is part of the city’s new Aksarben Village mixed-use development, include daylighting, outdoor workspaces, native landscaping, a green roof, and the pursuit of renewable energy credits.
| Aug 11, 2010
BU students move into high-rise dorm
Boston University’s newest residential building rises 26 stories above the Charles River. Part of the school’s 10-acre John Hancock Student Village, the 396,000-sf tower houses 962 students and has three apartments for faculty use. The tower also has a large multipurpose room on the top floor.
| Aug 11, 2010
Mixed-use Seattle high-rise earns LEED Gold
Seattle’s 2201 Westlake development became the city’s first mixed-use and high-rise residential project to earn LEED Gold. Located in Seattle’s South Lake Union neighborhood, the newly completed 450,000-sf complex includes 300,000 sf of Class A office space, 135 luxury condominiums (known as Enso), and 25,000 sf of retail space.