The amount of new office space hitting the market nationwide could dip by as 20 percent next year, a combination of rising costs, concerns over the end of the cycle and tightening zoning restrictions.
The amount of new office deliveries is expected to total 68.4 million square feet by the end of this year, and about 54.7 million square feet in all of 2019, according to Cushman & Wakefield. National Real Estate Investor first reported the story.
Developers have already delivered 28.8 million square feet across the country this year, said David Bitner, head of Cushman’s Americas capital markets research.
Manhattan has the most amount of square feet under construction with 16.7 million, followed by San Francisco with 8.5 million and Washington, D.C. with 7.5 million square feet, according to CBRE.
In South Florida, Broward, Miami-Dade and Palm Beach counties all saw office vacancy rates rise in the second quarter, signaling a slowdown in the market according to a recent report.
And in Chicago, office vacancy rate Downtown was 13 percent at the end of the second quarter, about the same as the first despite the addition of more than 1 million square feet of new office space.
Nationally, demand remains healthy. CBRE also reported that 60 percent of office space delivered in the second quarter was leased at the time of delivery.
Bittner it noted that some markets, like Brooklyn in New York, are at risk of overheating. San Mateo, California, also made that list. In Brooklyn’s case, it could take 10 years to absorb 2.5 million square feet of office space under construction.
Construction costs are also contributing to a dip in home construction. Residential home starts fell by 12.3 percent in June nationwide to an annualized rate of 1.17 million. That’s the largest drop since November 2016. That’s bearing in mind that May saw the highest number of starts since July 2007 at 1.35 million. [NREI] — Dennis Lynch