As Offices Gradually Fill Up, Cranes Start to Appear

Slowly but surely, U.S. office construction is on the rise.

For much of the six years since the economy tumbled in 2008, office developers havent been very busy. Save for the occasional city with a booming industry led by Houston and Silicon Valley new office construction has been sparse.

But thats been changing, particularly over the past year-and-a-half, numbers from the Census Bureau released last week show.

Office developers in September were spending at a pace that was up about 18% compared with September 2013, the Census said. The pace in September, if annualized, would result in $37 billion worth of office building construction for the year, the Census said.

That made office one of the fastest growing categories for construction spending multifamily grew more than 20% and is at about the level of construction seen in 2005.

Of course thats still well below the nearly $60 billion of office construction underway the last two times the market peaked in 2008 and 2000, but well above the $21 billion of office construction seen in 2011, one of the lowest levels in a generation.

Reasons vary, but generally the uptick is attributed to growing confidence by developers, investors and lenders, thanks to gradually growing occupancy rates and values, as well as loosening lending standards.

Of course, theres still more room for rents and occupancies to grow. U.S. office vacancy rates averaged at 16.8% in the third quarter, only a nudge down from a post-bust high of 17.6% that was reached in 2010, according to Reis Inc.

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As Offices Gradually Fill Up, Cranes Start to Appear