In 2017 the demand for commercial office space increased and investors took advantage of it. For 2018, we could see the trend continue as the driving force behind 2017’s dramatic increase is growing stronger and could surpass this year’s historically high numbers. Technology has long been the driving force behind office demand in many areas of the country. In fact, the top 10 cities for office demand include several of the country’s tech-focused markets with Santa Clara, CA, Brooklyn, NY and Seattle, WA leading the way for other cities.
Although the tech sector has driven the commercial real estate market for years, it saw an increase in the third quarter of 2017 according to a report Cushman & Wakefield. The report showed demand strong enough in some markets to actually keep the national market stable throughout the quarter.
New Growth Equals New Markets
How has this growth changed the market landscape? In recent years, Seattle was the only technology hub to rank in the top 10 cities for office absorption. Now, we are seeing many more tech-focused cities growing and increasing the demand for both commercial and office space. In fact, cities such as Santa Clara, Brooklyn, Seattle, Raleigh/Durham and San Diego have all seen more than 1 million square feet of space absorption this year alone.
Slower Growth in Certain Markets Affecting Industry
This doesn’t necessarily mean that the commercial market has grown stronger throughout the country. There are still many markets that are seeing negative office absorption. According to Cushman & Wakefield, 27 markets posted a combined total of 5.3 million square feet of negative absorption during the third quarter, compared with 3.4 million square feet of negative absorption in the second quarter.
The report created by Cushman & Wakefield also tracks about 104 million square feet of new office development in 87 markets across the U.S. Although that figure is down from the second quarter, it marks a sixth consecutive year where new office development has exceeded 100 million square feet.
What are the best markets for new office development opportunities? Midtown Manhattan (9.5 million square feet), Dallas/Fort Worth (6.3 million square feet), Washington, D.C. (5.3 million square feet), San Francisco (5.1 million square feet) and Boston (5 million square feet).
For more information on how the tech industry is driving the office development demand, contact Sovereign Realty Advisors today and let one of our commercial real estate professionals assist you and answer any questions you might have.