Last year, construction spending in New York City was up 26%, to $36 billion. And construction employment in the Big Apple, at 122,975, was the highest it’s been since 2008, according to the New York Building Congress. Of that dollar total, spending on nonresidential construction increased by 20% to $9.8 billion, the first time since 2010 that nonresidential spending grew year-to-year.
Those heady numbers, though, are no guarantees of future spending. In fact, New York is among the major metros—including Washington D.C., Phoenix, and San Diego—where office building development and construction are tailing off from historic levels or cooling down, according to CoStar, the real estate market research firm, in its report on the national office market trends for the first quarter of 2015.
The good news is that an estimated 108 million sf of office space were under construction in the U.S. at the end of the first quarter, a 17% gain over the same period a year ago. That construction level approached the historical average of 122 million sf, which the country last achieved in late 2008.
The cautionary news is that 15 million sf of office space were delivered in the first quarter of 2015, the first time in the latest economic cycle that deliveries exceeded net absorptions, which during that quarter were 12 million sf.
CoStar estimates that construction levels are above historic norms in about one-third of the largest U.S. metros. It singles out Silicon Valley in Northern California, which is seeing a rash of corporate campuses springing up. Other above-average office construction markets include Dallas-Fort Worth, Raleigh, Boston, and Chicago.
The researcher cites a shift in strategy among office building developers such as Boston Properties, which is using capital from the sale of older for new developments with potentially higher yields. Boston Properties has 11 office projects totaling 3.3 million sf in its current development pipeline.
CoStar notes that while rising rents are driving the office construction booms in certain markets like San Francisco, two thirds of the country’s metros are still not seeing the kind of rent appreciation that would justify large-scale new office construction.
That being said, among the notable deliveries in the first quarter was the 1.5-million-sf second phase of ExxonMobil’s corporate campus in Houston, which is also where a 1.7-million-sf campus that is fully leased to FMC Technologies got started during the quarter.
Lincoln Property started the first new office building in San Francisco’s Financial District in a decade, a 433,000-sf project that, despite being built on spec, shouldn’t have too much trouble finding tenants in a market whose office vacancy rate for four- and five-star buildings is 7.8%.
Related Stories
Plumbing | Mar 13, 2020
Pioneer Industries launches new website
Pioneer Industries launches new website
Architects | Mar 9, 2020
New York's façade inspection program gets an overhaul following a death from falling terra cotta
January 14, 2020, kicked off big changes to the NYC Local Law 11 Façade Inspection and Safety Program (FISP) for Cycle 9.
Office Buildings | Mar 5, 2020
SOM design’s Disney’s New York HQ
The HQ is being built in the Hudson Square neighborhood.
Office Buildings | Mar 3, 2020
REI’s new headquarters is all about the outdoors
NBBJ designed the project.
Adaptive Reuse | Feb 25, 2020
Hastings Architecture creates its new HQ from a former Nashville Public Library building
The building was originally constructed in 1965.
Office Buildings | Feb 13, 2020
CareerBuilder’s Chicago HQ undergoes renovation
Perkins and Will designed the project.
Office Buildings | Feb 11, 2020
Want your organization to be more creative? Embrace these 4 workplace strategies
Creativity is the secret sauce in the success of every business.
Office Buildings | Feb 11, 2020
Forget Class A: The opportunity is with Class B and C office properties
There’s money to be made in rehabbing Class B and Class C office buildings, according to a new ULI report.
Office Buildings | Feb 3, 2020
Balancing the work-life balance
For companies experiencing rapid growth, work-life balance can be a challenge to maintain, yet it remains a vital aspect of a healthy work environment.
Sponsored | HVAC | Feb 3, 2020
Reliable Building Systems Increase Net Operating Income by Retaining Tenants
Tenants increasingly expect a well-crafted property that feels unique, authentic, and comfortable—with technologically advanced systems and spaces that optimize performance and encourage collaboration and engagement. The following guidance will help owners and property managers keep tenants happy.