December 7, 2007—The surge in office development is ebbing, but office construction spending will expand 12% in both 2008 and 2009, on top of 19% gains experienced in the previous two years, according to Property and Portfolio Research, an independent real estate research and portfolio strategy firm.
While the value of office construction starts is up 27% year-to-date through October, monthly starts during the last four months have fallen below the late 2006/early 2007 peak, says the company. Rapid expansion of office-based industries, especially consulting, software, accounting, and insurance, is fueling the rising demand for office space.
The pipeline of planned office projects is stuffed with the value of pending projects, triple the amount since the last building cycle bottomed out four years ago. An increasing share of these projects, however, will be substantially delayed or remain unbuilt because new office supply now matches office space demand, keeping the national vacancy rate at 14.8%.
Rents are increasing rapidly in areas where rapid-growth, office-based industries are concentrated, including Boston, Los Angeles, New York, and the San Francisco Bay Area. For more information, see the Web site.
