Spending for office construction has been steady since January as the office vacancy rate has bottomed out at about 16.5% in the first two quarters. But the first signs of a beginning recovery have now appeared. The square footage of vacant space declined slightly during the spring quarter in the CB Richard Ellis vacancy survey. In addition, employment in office-based industries has gained 1.0% in last 12 months.
So far, the added office jobs are entirely in government, social services, and neighborhood professional offices. Finance is the only industry to gain jobs recently among the industries that typically locate in downtown office towers or suburban office parks.
Layoffs continue at corporate headquarters, professional services, information industries, business support services, and technical services.
The current job totals are almost certainly being underestimated by the Bureau of Labor Statistics, as happens whenever the economy grows quickly. The bureau eventually added 1.5 million more jobs to the initial recovery period in the early 1990s. So office employment gains will be quickly expanding from the strip malls to office parks and towers.
The resulting forecast is for office construction spending to inch up only 3% by the end of 2003, then expand at a sustained 9% pace in 2004.