Office Sector Report: After a six-year slide, the office market is back in business

The office market began to grow rapidly late last year after declining since 2000. The turnabout was driven by the strengthening economy, which reduced office vacancy rates and pushed rent increases up to a 6% per year pace.

The office-based finance, insurance, real estate, professional, and technical services industries are adding employees twice as fast as the rest of the economy. This is a typical occurrence at the mature end of a business expansion.

Jobsite construction spending is expected to increase 20% in 2007 and 12% in 2008. The year-to-date value of office starts through May is 45% above the same five months last year, according to Reed Construction Data.

The value of office starts will increase 20% for all of 2007 and then expand enough to keep up with rising project costs for several more years.