Office Construction to See Slowdown in 2019
July 30, 2018
A slowdown in office construction may be on the horizon. David Bitner, head of Americas capital markets research with Cushman & Wakefield, said in National Real Estate Investor that rising construction costs and zoning issues are among the reasons developers could pull back.
By the end of 2018, new office space will be at more than 68 million sq. ft., but Bitner predicts 2019 will only have roughly 55 million sq. ft. of new office space. The first two quarters of 2018 saw nearly 30 million sq. ft. of new space, more than the same time period a year ago.
Manhattan, San Francisco, Washington, DC, Seattle and the Dallas/Ft. Worth region are the top-five office construction markets. Manhattan has nearly double the square footage as second place San Francisco and more than a third of that in the Dallas market, according to commercial real estate services and investment firm CBRE.
A majority of the office space under construction is already preleased, said Andrea Cross, CBRE’s Americas head of office research, in the National Real Estate Investor report.
“Due to the moderate rate of the current office expansion and rising construction costs, development has been concentrated in the markets and submarkets where tenant demand and rent growth have been strong enough to justify it,” said Cross.
There is also the risk of overbuilding, noted Bitner, who said areas such as Houston and Northern Virginia face this concern due to the rate the markets absorb new product.
-Michael Miller, managing editor