The construction-put-in-place growth rate for 2014 office construction is now expected to reach 8%, with an additional 7% growth in 2015 reaching $43.6 billion. Unemployment rates and rising GDP are providing part of the lift for the revised forecast.
Vacancy rates are expected to change little in the next year, largely due to new properties coming online. Net absorption will still be positive, according to the National Association of Realtors (NAR). The NAR predicts that net absorption of office space in the United States is likely to total 36.2 million sq ft this year and 50.7 million sq ft in 2015. This includes the leasing of new space coming on the market as well as space in existing properties. The NAR also predicts office rents will increase 2.6% in 2014 and 3.2% in 2015.
Overall, industry growth looks more sustainable than it has in many years. Large metropolitan areas, such as New York City, are benefiting the most as vacancy rates drop to 10.6%. National vacancy rates are hovering around 16% to 17%. Long-term sustainability will depend largely on the weaker markets making a comeback in the next few years.
