With homebuyers turning their glances toward less density and residential construction following suit, there has been much speculation that new office development wouldn’t be far behind.
According to new data from Yardi Matrix, that shift may already be in motion.
With the COVID-19 pandemic pushing more and more office-based employment toward remote work, the amount of planned office development situated in urban city centers has been on a slow but steady decline. At the beginning of 2020, 20.8% of planned office properties were in a central business district submarket. At the end of August, that percentage had dropped to 15.9%.
“Shifts of this nature take a long time to play out,” said Yardi’s September 2020 National Office Report, “but this could be a sign of softening in the urban core.”
Yardi’s report also noted that overall office property sales continue to lag behind 2019’s pace due to the impacts of the pandemic. Some $33.9 billion in office transactions were posted through August this year, down 39% from the $55.2 billion in sales logged through the same month a year prior.
Despite the plunge in transaction volume, however, prices have kept rising. The year-to-date price per square foot for office buildings stood at $278 at the end of August, up 2% from 2019 and 11% from 2018.
The pandemic has also yet to have a material impact on the pipeline of new office supply. Consider that there were 147 million square feet of new office space under construction in January, with another 50.8 million square feet of planned new space. As of August, under-construction property had dropped to 141 million square feet, but the 56.2 million square feet of planned space makes up for the decrease, keeping the pipeline roughly equivalent.