With work-from-home firmly established, many real estate analysts predict a dramatic reduction in office space leasing and plummeting property values.
But the high-end of the office segment might actually be headed for a shortage, according to real estate intelligence company CoStar Group. This counterintuitive trend is due to a drastic drop in construction of elite Class A properties.
Despite the overall drop in occupied office space, buildings aged 0-3 years are doing well. They have attracted an average of 12.7 million sf per quarter since the beginning of 2020. By comparison, the quarterly average from 2011-2019 for similar properties was 11.7 million sf.
Office construction has slowed dramatically this year. Less than 30 million sf has broken ground in 2023, making it the lowest year for construction starts since 2011. If this trend continues, the type of space most in demand—newly constructed units—will have the shortest supply.
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