Office Deliveries In 2022 To Exceed Pre-Pandemic Average

Companies looking to lure employees back to the office are using new amenities and high-quality spaces as bait, and developers are building more new offices to reel workers in.

Developers are expected to deliver an estimated 48.5M SF of new offices this year nationwide, along with 25.6M SF in 2023, according to a new report on U.S. office construction by Cushman & Wakefield. 

The total for this year represents 1.8% of existing inventory, which is down from just before the pandemic, when new construction represented nearly 2.5% of inventory. But deliveries in 2022 will still be higher than the pre-pandemic average of 1.3% of inventory, Cushman & Wakefield reports.

The total forecasts for this year and next year factor in delays in obtaining building materials due to supply chain issues caused by the pandemic, the report notes.

The report also finds that new office construction in 12 major U.S. markets and Toronto will command a rent premium of 64% over average Class-A submarket rents and 20% over existing top-tier trophy assets. 

“Tenants are demonstrating a strong bias for the highest quality, newly constructed office projects across major U.S. and Canadian markets," Cushman & Wakefield Global Head of Economic Analysis and Forecasting Rebecca Rockey said in a statement. "They are looking for a fundamentally different, elevated, office experience.” 

The flight to quality in the office sector has been a pronounced trend recently, according to office experts, even as workers are returning to offices at a slow pace. The higher the quality of the space, the thinking goes, the more incentive there will be to return to offices as the pandemic recedes.

“I see office rebounding dramatically as we exit Covid. All of these short-term renewals will start to expire and people will go looking for more long-term solutions and new buildings will be benefactors of pent-up demand,” Rockefeller Group Senior Managing Director Jay Despard told Bisnow.