Steady growth in office-based employment over the last few years, and rising demand from big employers for a diminishing supply of newer high-quality office space in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – have combined to create a fertile environment for new office construction . . . and developers are ready to deliver.
This year will likely be the peak in the cycle for the delivery of new office projects, said the latest CoStar Portfolio Strategy forecast. The U.S. office vacancy rate has continued to steadily decline, moving from 10.7% in 2015 to 10.4% in 2016. Vacancies in the U.S. and Philadelphia commercial real estate markets are expected to hold fast at 10.3% in 2017 amid ongoing demand for existing space from tenants, said analysts presenting CoStar’s State of the U.S. Office Market Q4 2016 Review and Forecast presentation.
This report on national and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
The hefty totals projected for this year involving U.S. and Philadelphia commercial real estate properties are the result of the large number of new office projects started in 2015. The 129 million square feet of new office space started in 2015 included such massive mixed-use developments as 30 and 55 Hudson Yards, and the $1.2 billion One Manhattan West office tower in New York City. An even larger total of 138 million square feet of new office space was under construction as of this past January 1.
Major construction that normally involves both national and Philadelphia commercial real estate listings is concentrated instead in a handful of large metros. New York City has seen a jump of 107% while Southern California, where construction has started to pick up substantially for the first time since the recession, is up 27% in two years’ time. Texas office construction is down 35% since 2015, largely due to the construction shutdown in Houston, where energy sector tenants have put large blocks of space on the sublet market.
The 138 million square feet under way is still significantly lower than the 2000-2001 period, when more than 200 million square feet in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – was under construction. This has allowed national office vacancies to remain well below long-term averages, the CoStar report noted.
Most large markets involved with U.S. and Philadelphia commercial real estate listings are seeing construction levels as a percentage of total office inventory well above their historical averages. In the San Jose market, for example, construction totaling 9% of total office inventory — 10 million square feet — is under way, compared with 1.4% nationally. While pre-leasing is quite strong, a potential concern could be rising levels of backfill space that may become available when companies move into their new quarters.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) or Christopher R. Henderson (chris.henderson@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
Wolf Commercial Real Estate is a Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.
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