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
| Feb 11, 2011
RS Means Cost Comparison Chart: Office Buildings
This month's RS Means Cost Comparison Chart focuses on office building construction.
| Feb 11, 2011
Kentucky’s first green adaptive reuse project earns Platinum
(FER) studio, Inglewood, Calif., converted a 115-year-old former dry goods store in Louisville, Ky., into a 10,175-sf mixed-use commercial building earned LEED Platinum and holds the distinction of being the state’s first adaptive reuse project to earn any LEED rating. The facility, located in the East Market District, houses a gallery, event space, offices, conference space, and a restaurant. Sustainable elements that helped the building reach its top LEED rating include xeriscaping, a green roof, rainwater collection and reuse, 12 geothermal wells, 81 solar panels, a 1,100-gallon ice storage system (off-grid energy efficiency is 68%) and the reuse and recycling of construction materials. Local firm Peters Construction served as GC.
| Feb 11, 2011
Chicago architecture firm planning one of China’s tallest towers
Chicago-based Goettsch Partners was commissioned by developer Guangzhou R&F Properties Co. Ltd. to design a new 294,570-sm mixed-use tower in Tianjin, China. The Tianjin R&F Guangdong Tower will be located within the city’s newly planned business district, and at 439 meters it will be one of China’s tallest buildings. The massive complex will feature 134,900 sm of Class A office space, a 400-key, five-star hotel, 55 condominiums, and 8,550 sm of retail space. The architects are designing the tower with multi-story atriums and a high-performance curtain wall to bring daylight deep into the building, thereby creating deeper lease spans. The project is currently finishing design.
| Jan 21, 2011
Manufacturing plant transformed into LEED Platinum Clif Bar headquarters
Clif Bar & Co.’s new 115,000-sf headquarters in Emeryville, Calif., is one of the first buildings in the state to meet the 2008 California Building Energy Efficiency Standards. The structure has the largest smart solar array in North America, which will provide nearly all of its electrical energy needs.
| Jan 19, 2011
Baltimore mixed-use development combines working, living, and shopping
The Shoppes at McHenry Row, a $117 million mixed-use complex developed by 28 Walker Associates for downtown Baltimore, will include 65,000 sf of office space, 250 apartments, and two parking garages. The 48,000 sf of main street retail space currently is 65% occupied, with space for small shops and a restaurant remaining.
| Jan 7, 2011
Mixed-Use on Steroids
Mixed-use development has been one of the few bright spots in real estate in the last few years. Successful mixed-use projects are almost always located in dense urban or suburban areas, usually close to public transportation. It’s a sign of the times that the residential component tends to be rental rather than for-sale.
| Jan 4, 2011
An official bargain, White House loses $79 million in property value
One of the most famous office buildings in the world—and the official the residence of the President of the United States—is now worth only $251.6 million. At the top of the housing boom, the 132-room complex was valued at $331.5 million (still sounds like a bargain), according to Zillow, the online real estate marketplace. That reflects a decline in property value of about 24%.
| Jan 4, 2011
Grubb & Ellis predicts commercial real estate recovery
Grubb & Ellis Company, a leading real estate services and investment firm, released its 2011 Real Estate Forecast, which foresees the start of a slow recovery in the leasing market for all property types in the coming year.
| Dec 17, 2010
Vietnam business center will combine office and residential space
The 300,000-sm VietinBank Business Center in Hanoi, Vietnam, designed by Foster + Partners, will have two commercial towers: the first, a 68-story, 362-meter office tower for the international headquarters of VietinBank; the second, a five-star hotel, spa, and serviced apartments. A seven-story podium with conference facilities, retail space, restaurants, and rooftop garden will connect the two towers. Eco-friendly features include using recycled heat from the center’s power plant to provide hot water, and installing water features and plants to improve indoor air quality. Turner Construction Co. is the general contractor.
