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
Contractors | Jul 4, 2016
A new report links infrastructure investment to commercial real estate expansion
Competitiveness and economic development are at stake for cities, says Transwestern.
High-rise Construction | Jun 29, 2016
Best Tall Buildings around the world favor unusual shapes and hybrid functions
The Council on Tall Buildings and Urban Habitat selects winners in four regions.
Office Buildings | Jun 16, 2016
Ability to focus, not perks, is top concern for office employees
Open-plan offices found to worsen distraction problem.
High-rise Construction | Jun 15, 2016
WilkinsonEyre designs diamond-patterned Bay Park Centre for Toronto
A sloping plaza with trees, grass, and gardens connects the two downtown towers.
Office Buildings | Jun 14, 2016
Let's not forget introverts when it comes to workplace design
Recent design trends favor extroverts who enjoy collaboration. HDR's Lynn Mignola says that designers need to accommodate introverts, people who recharge with solitude, as well.
Movers+Shapers | Jun 13, 2016
THE DISRUPTORS: The Millennial generation is imposing its will on design
AEC firms, particularly those that design hotels and offices, gain a competitive edge by knowing how to appeal to the largest share of the American workforce.
Office Buildings | Jun 10, 2016
Buildings that invest in wellbeing see healthy returns
Healthy workers are more productive workers, but fitness can be tough when employees at the office for 50 hours a week. Perkins+Will's Janine Grossmann offers the wellness components that landlords and companies should prioritize.
Office Buildings | Jun 10, 2016
Form4 designs curved roofs for project at Stanford Research Park
Fabricated of painted recycled aluminum, the wavy roofs at the Innovation Curve campus will symbolize the R&D process and make four buildings more sustainable.
Office Buildings | Jun 7, 2016
Incorporating places to rejuvenate into office design
Workspaces are geared toward socializing and collaboration, but people need quiet, calm places where they can sit alone and focus. Gensler's Penny Lewis offers three ways to design rejuvenation places into office settings.
Market Data | Jun 3, 2016
JLL report: Retail renovation drives construction growth in 2016
Retail construction projects were up nearly 25% year-over-year, and the industrial and office construction sectors fared well, too. Economic uncertainty looms over everything, however.