Investors Eye New Buildings for Office Space

April 30, 2015

Deliveries on newly constructed office space exceeded demand in the first quarter of this year, as office construction inches closer to its long-term averages, the CoStar Group reports.

During the first quarter, about 15 million square feet of office space was delivered to the U.S. market, and about 108 million square feet was under construction, up 17 percent over last year, according to CoStar data. The amount of office space under construction is nearing its quarterly historical average of 122 million square feet, which hasn't been reached since late 2008.

Rather than acquiring existing buildings at rising prices, some owners are selling their current buildings and re-investing their profits into new developments that they believe could offer the potential for higher returns.

Construction levels are rising above their historical averages in about one-third of the largest U.S. metros, led by Silicon Valley and Houston, CoStar notes. In Silicon Valley, Apple is building its 2.8 million-square-foot "spaceship" corporate campus in Cupertino, Calif. In Houston, ExxonMobil is constructing a massive new corporate campus. Other markets seeing an above-average construction increase are Seattle; Austin, Texas; San Francisco; Raleigh, N.C.; Dallas-Fort Worth; Boston; Chicago; and Denver.

Source: “By the Numbers: U.S. Office Construction Picking Up Momentum,” CoStar Group (April 29, 2015)