Despite concerns of potential oversupply, construction activity remains steady. The next four quarters will see more than 62 million square feet of office space deliver, and concerns over overbuilding have yet to materialize in a significant slowdown in construction activity. Office construction volume and starts over the next 12 months will be closely watched for any sign that the pipeline of work has begun to taper off materially.
Groundbreakings are shifting to large-scale, anchor tenant–driven projects.
Four major office projects of over 300,000 square feet broke ground in Q2 2019, 5M in San Francisco, Phase 2 of the Wharf in Washington, DC, Avocet Tower in Suburban Maryland and the Summit III in Bellevue. Vacancy has declined in CBD Class A buildings overall as a result of major new projects delivering with high rates of preleasing.
Talent shortages have yet to stop users from taking on new space. Tech and coworking remain the dominant industries taking new office space, followed closely by finance and insurance. Year-to-date in 2019, 52.1 percent of leasing activity has represented growth, indicated that office tenants overall are still expanding and positive about their potential to grow in coming years.