The office space market is facing a new reality in 2024: lower demand and a need for adaptation. While new construction shrunk by 28% compared to last year with 97 million square feet currently under development nationwide, there’s an interesting twist: Cities are responding by converting unused offices into other uses, such as housing.
Using CommercialEdge data, CommercialCafe released its yearly pipeline report that looks at trends around office construction activity throughout the country’s major real estate markets and ranks the largest office projects set to be delivered throughout 2024.
Looking at specific cities, Boston is a standout – both in overall construction volume and the proportion of new office space within the overall stock as its pipeline continues to be fueled by demand for life sciences workspaces. On the other hand, Manhattan construction activity shrunk to a modest 3 million square feet. However, on the opposite coast, Seattle claims two projects exceeding 1 million square feet in the top 20 largest office deliveries expected in 2024.
Keep reading for more insights into U.S. office construction activity.
Boston Leads the Pack: Life Sciences Continue to Drive Office Construction in Northeast
Construction activity data gathered by CommercialEdge points to Boston as the nation’s undisputed leader in office development activity. Unsurprisingly, life sciences facilities are a major driver of this market activity, which, in 2023, totaled roughly 14.6 million square feet. Interestingly, Boston’s anticipated delivery volume for this year is expected to be more than double that of its closest rival, San Francisco, where the pipeline stands at 7 million square feet.
To that end, Western markets played a key role in the ranking by boasting four entries within the top 10 positions. Of course, California entries dominated, but Seattle also claimed the third spot with 6 million square feet of ongoing construction. Not to be outdone, San Diego followed in fourth place with 5 million square feet, while the San Francisco Bay Area also secured a respectable seventh place finish with 4.5 million square feet currently in the pipeline.
That said, Boston is also in a leading position when it comes to stock expansion. In fact, its 6% projected increase is the highest among the top markets with San Diego and Austin, Texas, as the runners-up with 5.4%.
Walt Disney’s Towering Project Claims Top Spot in Nation’s Under-construction Offices
The 1.3-million-square-foot 4 Hudson Square in New York City is the largest project among ongoing office constructions and reigns supreme on our top 20 projected office deliveries list. Developed by Silverstein Properties and designed by Skidmore, Owings & Merrill, this 22-story behemoth will soon house Walt Disney’s consolidated workforce under one roof. Marking a shift in Lower Manhattan’s landscape, the former Printing District property will now serve as Disney’s new headquarters, joining the growing trend of studio and office space conversions in the area.
It’s worth noting that Manhattan’s office development has shrunk both in terms of its contribution to the top-ranking deliveries list (from six to just two entries), as well as the market’s total square footage volume, which fell by 69% year-over-year.
Next, and spanning 17.3 acres in Sacramento, California’s revitalized River District, the California Department of General Services’ 1.25-million-square-foot Richards Boulevard Office Complex is the second-largest development in the pipeline this year. This owner-occupied building – which prioritizes sustainability by aiming for net-zero energy and carbon emissions – is on track for completion in the second quarter of 2024. As such, it promises a significant addition to Sacramento’s landscape and sets a high bar for sustainable development in the region.
Further north, Seattle’s office market provided the highest number of entries in the top 20 largest projects under construction. Notably, three of these five projects (amounting to 4 million square feet) are found in Bellevue, Washington. Furthermore, Bellevue also boasts the largest ongoing construction project in the state: the 43-story Tower 1 at Bellevue 600. Owned by Amazon, it’s slated for completion in Q2 2024 and will accommodate a portion of its 10,000-strong workforce in the area.
For more highlights, as well as a breakdown of the methodology, read the full report on CommercialCafe.com.
