Newly planned developments are shifting away from commercial business districts and employment is slow to recover
SANTA BARBARA, Calif., Sept. 29, 2020 – As the COVID-19 pandemic accelerates the remote work trend, industry observers have anticipated a shift of new office development away from city centers. “Yardi Matrix® data for planned properties shows this speculation is starting to become a reality,” states the latest commercial office report.
In January 2020, 20.8% of all planned office properties were in a CBD submarket. As of the end of August, that share had fallen to 15.9%. Shifts of this nature take a long time to play out, but this could be a sign of softening investment in the urban core.
The report also states that the national average full-service equivalent listing rate rose 11 cents to $38.32 in August from the previous month, but continues to experience slightly negative year-over-year growth (-0.4%), amid continued uncertainty for office real estate. Same-store listing rate growth was highest in Manhattan (16.5%), San Diego (5.9%) and Denver (3.0%). Same-store listing rates decreased the most in Brooklyn (-12.0%) and San Francisco (-7.9%).
“Overall, the COVID-19 pandemic has yet to have an impact on the national new-supply pipeline,” states the report. In January, there were 147 million square feet of new office space under construction and an additional 50.8 million planned. Under-construction square footage has fallen to 141 million square feet, but the 56.2 million square feet of planned new space means the pipeline has remained roughly the same.
Nationally, employment in office-using sectors decreased by 5.1% year-over-year in August. Despite many employees in these sectors continuing to work from home into the fall, the employment data suggests demand for office space may rebound quickly if a vaccine for the coronavirus is delivered in the next year.
Only Austin, Chattanooga and the Tri-Cities[LE1] added office-using jobs in the last year. Read the latest Yardi Matrix report to discover which secondary and tertiary tech markets could attract future development and investment interest.
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[LE1]Probably need to specify where this is