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 29, 2015
Consensus Construction Forecast: Double-digit growth expected for commercial sector in 2015, 2016
Despite the adverse weather conditions that curtailed design and construction activity in the first quarter of the year, the overall construction market has performed extremely well to date, according to AIA's latest Consensus Construction Forecast.
Office Buildings | Jul 23, 2015
Office bust hits suburban Washington D.C.: metro area awash in vacant office buildings
Most of the building and buying is happening within the city’s limits.
Office Buildings | Jul 21, 2015
Finally! There's a workplace trend that’s worth embracing
There’s a realization by corporate real estate executives that in order to create a successful workplace, there must be alignment between their people, their place, and the tools they have to do their jobs.
High-rise Construction | Jul 20, 2015
Morphosis' Casablanca Finance City tower to be topped with crown-shaped pinnacle
The tower will anchor a new business district being planned, similar to the glass and concrete business La Défense section at the outskirts of Paris.
Office Buildings | Jul 15, 2015
BIG’s design for Philadelphia Navy Yard defies gravity
Ground has broken for 1200 Interpid, a 94,000-sf office building designed by BIG that appears to be leaning.
High-rise Construction | Jul 13, 2015
Herzog & de Meuron’s triangle tower stirs controversy in Paris
The 590-foot glass pyramid building will include a 120-room hotel, 754,000 sf of office space, and cultural facilities.
High-rise Construction | Jul 7, 2015
Bjarke Ingels designs Frankfurt skyscraper with a surprise in the middle
Several levels in the center of the 185-meter tower are shifted outward to allow for terraces with city views.
Office Buildings | Jun 30, 2015
'What’s the latest trend in workplace design?': How architects and designers should answer this hot-button question
Hint: Your response must be better than a laundry list of solutions, according to VOA Associates' John Varholak.
Museums | Jun 28, 2015
Manhattan's New Museum debuts first museum-led incubator space
Part studio, part shared workplace, part lab, and part professional development program, NEW INC connects design with technology, the arts with the market, students with seasoned practitioners, and the museum with the world.
High-rise Construction | Jun 23, 2015
The world's best new skyscrapers for 2015
One World Trade Center and Abu Dhabi's Burj Mohammed Bin Rashid Tower are among the four towers named Best Tall Buildings by the Council on Tall Buildings and Urban Habitat.