Top 10 Markets for Office Deliveries in 2022 - What is a Ground Lease?
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Office deliveries throughout 2022 totaled nearly 61 million square feet nationwide, accounting for 0.8 percent of total stock, according to CommercialEdge data. Office development lost steam this year, as clouds of uncertainty continue to loom over the real estate landscape amid a slowing economy. Consequently, office deliveries recorded a 28.6 percent decrease from the 85.4 million square feet completed in 2021. Construction starts, however, totaled 75.5 million square feet last year, surpassing 2021’s total of 62.1 million square feet.
The bulk of completed projects was concentrated in gateway and tech-centric markets. The ten metros on this list account for 55.2 percent of the square footage which reached completion in 2022.
Sq Ft Delivered
% of stock
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Gateway markets continue to be an evergreen attraction to investors. As a result, developers in Manhattan kept busy in 2022, focusing on highly amenitized office space, as well as mixed-use buildings and large developments. Overall, they completed 10 projects with a combined square footage of 7 million square feet, 1.5 percent of total stock and 70 basis points higher than the national average of 0.8 percent.
The largest share of deliveries was situated in the Chelsea submarket, where two properties encompassing a little over 2.9 million square feet saw completion by year-end. The largest one was the 2.9 million-square-foot 50 Hudson Yards, a $3.8 billion project developed by a joint venture between Related Cos., Mitsui Fudosan America and Oxford Properties Group.
In Austin, 39 projects totaling 4.3 million square feet of office space were completed in 2022, equal to 4.1 percent of existing inventory—the largest share in terms of percentage of stock—and 330 basis points above the national rate. Office deliveries surpassed completions from 2021, when 3.2 million square feet, or 34.7 percent less, was added to the market.
Deliveries were concentrated in downtown Austin, where nearly 1.3 million square feet across three properties came online. The largest office project consisted of Block 185, a 796,525-square-foot project at 601 West 2nd St. fully occupied by Google. Trammel Crow broke ground on the property in 2019 and completed it in August.
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Life sciences and tech continue to fuel Boston’s development activity. The metro saw close to 3.6 million square feet of office space delivered throughout 2022, accounting for 1.3 percent of total stock and up 50 basis points when compared to the national average. Office deliveries recorded a 17.0 percent drop from 2021, when 4.2 million square feet was added to the metro’s stock. What’s more, the metro had close to 6.7 million of office construction starts in 2022.
Data from Commercialedge shows that in the Fenway submarket, three properties totaling 977,840 square feet were finalized in 2022. The largest one consisted of Alexandria Real Estate Equities’ 201 Brooklyn Avenue, a 510,116-square-foot project completed last September and anchored by Verve Therapeutics.
4. San Francisco
Nearly 3.4 million square feet of office space came online in the metro in 2022, representing 1.9 percent of total stock and 110 basis points above the national rate of 0.8 percent. Total deliveries declined by 44.4 percent when compared to 2021’s total of 5 million square feet.
Completed office projects were concentrated in the South San Francisco submarket, where three properties totaling nearly 1.2 million square feet saw completion. The largest delivery in the submarket—and in the metro—was Kilroy Realty’s 656,000-square-foot Kilroy Oyster Point-Inception. The project represents the first phase of the transformation of 81 acres of bayfront on Oyster Point Boulevard.
5. Dallas-Fort Worth
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Office deliveries in the Dallas-Fort Worth metro throughout 2022 amounted to a little over 3 million square feet of space, accounting for 0.9 percent of existing stock. Despite heightened construction activity—office construction starts in 2022 totaled 4.4 million square feet—the metro didn’t manage to reach pre-pandemic levels for office completions. Resembling San Francisco, deliveries in 2022 recorded a 44.5 percent decrease from the 4.3 million square feet finished in 2021.
The bulk of deliveries—20.6 percent—was concentrated in the South Dallas submarket. Two properties encompassing 622,930 square feet were completed, with the largest delivery consisting of Westdale Asset Management’s 485,000-square-foot The Epic II.
The California market saw a little over 2.9 million square feet of office space delivered in 2022, representing 0.9 percent of total stock and nearly on par with the national average. The volume of office deliveries increased by 5.9 percent when compared to 2021, when some 2.7 million square feet came online.
Development activity was concentrated in the West Los Angeles submarket, where 1.1 million square feet was added to the market throughout 2022. The largest property was One Westside, a 680,000-square-foot office asset developed by Hudson Pacific Properties. Construction of the Google-occupied building broke ground in August 2019.
7. Washington, D.C.
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Office developers completed projects totaling 2.7 million square feet of office space during 2022, or 0.7 percent of total stock. This represents a 28.3 percent decrease from the year prior, when close to 3.8 million square feet of office space was added to the metro’s inventory.
In Bethesda, Md. joint venture partners The Bernstein Cos. and Boston Properties finished Marriott’s International new headquarters. The 785,000-square-foot asset at 7750 Wisconsin Ave. houses both the hospitality company’s flagship office and a Marriott hotel.
Chicago was one of the hardest-hit metros during the pandemic, resulting in a little over of 1.3 million square feet of office space delivered in 2021. However, the market has shown strong signs of recovery, and developers completed seven projects with a combined square footage of nearly 2.6 million, or 0.7 percent of total stock. This represents a 90.8 percent increase from 2021, when 1.3 million square feet was completed.
The largest projects to come online in 2022 were located in Chicago’s Central Business District, where two assets totaling more than 1.5 million square feet delivered. Developed by Riverside Investment & Development, 320 Canal encompasses more than 1.4 million square feet across 52 floors.
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Developers completed 12 office projects totaling a little over 2.2 million square feet in 2022, equal to 1.0 percent of stock. This represents a 57.6 percent decrease from the same period in 2021, when 5.3 million square feet came online. Despite a slowdown in office deliveries, developers broke ground on 18 office projects totaling more than 11.6 million square feet in 2022, making Atlanta the hottest market for new construction activity on our list.
Developers focused their efforts on the Midtown submarket, where two properties totaling 927,536 were delivered. The largest one is the 612,947-square-foot Midtown Union, developed by MetLife Real Estate investment and anchored by Invesco.
10. Bay Area
The pandemic’s impact on the Bay Area’s office landscape was significant, resulting in less than 2 million square feet of new office space delivered in 2022, accounting for 0.7 percent of the total stock. Office completions recorded a drop when compared to 2021 volume, when 3.9 million square feet—or 49.9 percent more—was added to the market. In the meantime, new office starts in the metro during 2022 totaled 4.8 million square feet.
The largest project to come online in 2022 was a 754,800-square-foot project constructed by NVIDIA. Known Voyager, the four-story building serves as the tech giant’s headquarters. Construction started in June 2018, and the asset reached completion in February 2022.
The post Top 10 Markets for Office Deliveries in 2022 appeared first on Commercial Property Executive.
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These metros account for more than half of the total square footage completed in 2022
, according to CommercialEdge data.
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