According to a new forecast from Cushman & Wakefield, office construction is approaching pre-pandemic levels.
The firm is predicting that 48.5 million square feet of office space will be delivered across 90 US markets in 2022, with 25.6 million square feet expected to come onto the market next year.
Despite the ongoing uncertainty plaguing the office sector and supply chain issues, developers are moving forward with projects as the world begins to shift back to pre-pandemic activities.
“What we see from an interest perspective is that developers are recognizing the outperformance element of new construction,” said Rebecca Rockey, global head of economic analysis and forecasting at Cushman & Wakefield. “There’s not so much fear associated with new product. That’s where we’re seeing (tenant) demand go.”
Rocky said that Class A and other newer buildings saw a significant portion of tenant interest, even prior to the pandemic. In fact, she added that Class A buildings developed or renovated in the last five years saw twice as much leasing activity compared to older buildings.
While Cushman & Wakefield is expecting that office absorption will become positive by the middle of 2022, regions like New York City may see increased vacancy that falls behind the national average.
Although this is generally good news for the US office market as a whole, landlords of older buildings will face increased pressure to update their space or suffer from high vacancy rates and decrease occupancy activity.