The US Cities with the Most New Office Constructions in 2013
November 11th, 2013 by Diane Moore
There has been a resurgence of office space construction projects in the US in 2013 in spite of the slow recovery of the economy. The growth in the commercial real estate market may not have a great impact nationwide, but some metropolitan areas are witnessing a mini-boom in new office space construction projects. According to CoStar’s count, the number of new office construction projects has virtually doubled by the third quarter of 2013.
McGraw-Hill Research estimates that construction has increased by 10% from 2012, and is expected to reach 12% by the end of 2013. Although commercial construction has only witnessed a modest rise, it has caused a great buzz in the market in some areas, including Washington DC, Boston, Atlanta, Miami, Los Angeles, New York, and many of cities across the country. McGraw-Hill has used the dollar value of the “construction starts” as a leading indicator of economic activity, an indicator that is commonly used by builders, economists, and developers.
According to data from McGraw Hill Construction Dodge, New York tops the list of the hottest commercial markets in 2013, with most of its office space development projects taking place in Lower Manhattan. Manhattan is witnessing a boom with five new office towers scheduled to be completed between May 2013 and May 2014. The new construction projects will add 6.5 million square feet to the growing market. The current office space development projects in Manhattan constitute a big surge in the restructuring of the Manhattan Skyline, with the One World Trade Center comprising of 3,000,000.
This project is estimated to be one of the largest office space construction projects to be completed within a period of 12 months since 1989. Four World Trade Center will add another 2,000,000 square feet to the office space in the city. Other major construction projects taking place in the adjacent neighborhoods are the 250 West 55th Street, 55 West 46th Street, and 51 Astor Place.
Names of developers associated with this mini-boom are Port Authority of New York & New Jersey for One World Trade Center, Silverstein Properties developing Four World Trade Center. Other office space development projects are handled by Minskoff Equities, Extell Development Company, and Boston Properties. One World Trade Center is going to be the tallest building in the western hemisphere and is one of the major contributors to the new developments in New York City.
Dallas might have been thought to have suffered from a long drought in office space construction, but most recently, statistics show the contrary. The dollar value of the construction starts through October 2013 is estimated to be at $1.06 billion, with a huge difference from the +$117 million from the same period the previous year. Major construction projects are taking place in Richardson. The State Farm insurance complex is under construction and takes the biggest chunk of the office space in Dallas. Developers are scrambling to get office space projects off the ground. It’s a boom that has quadrupled the office space being added in this area from last year. New buildings are being announced almost every week.
As of the moment, about 4 million square feet of office space is under, construction and planned projects may be roughly estimated at 1 million square feet. Great players in the office space development projects such as Billingsley Co., Myers & Crow, and Capital Commercial Investments have announced new projects in North Texas. These projects will take around 900,000 square feet. Companies like Hall Financial, Bandera Ventures, KDC, and the Richards Group are still unveiling plans for other projects in the Dallas area. Developer Billingsley Co. is developing an international business park in Carrolton, a structure that will take 180,000 square feet. The largest project started so far in 2013 is the Addition T5 at the Dallas Data Center.
In Boston, Suffolk Construction, one of the busiest and biggest contractors, has proposed to build a new headquarters in the Innovation District of the city. The 125,000-square-foot building will be built along Harbor Street. It will provide office space for 450 workers. The CEO of the company, John Fish, says the vibrancy and the buzz of this district will only get bigger in the near future. The authorities have also approved many other projects in Boston, including a 58-story condominium that will be developed near Christian Science Plaza.
The new construction projects that are taking place in Boston today are concentrated in three main areas: the Innovation District, Kendall Square, and Longwood Medical Center. At Kendall Square, major projects include the $500 million Alexandria Center, the $600 million Novartis Institute for Biomedical Research, the $343 million Broad Institute. The major projects in the Innovation District include the $800 million Vertex Pharmaceuticals, and the $5.5 million Boston Innovation Center. In Longwood Medical Center, the $350 million Longwood Center and the $200 million Boston Children’s Hospital Expansion are among the major projects taking place.
The dollar value of construction starts through October 2013 is estimated at $540 million in Houston, a huge increase from the $34 million from the same period last year. Currently, the new office space construction projects in Houston is taking more than 12.5 million square feet, and planned projects are estimated to take 6 million square feet. According to MetroStudy map, most of the development is taking place on the west side of the city, with projects in the Woodlands and Exxon Mobile campus on the lead.
The largest construction project started in Houston this year is the M.D. Anderson in the Texas Medical center, a project that costs $198 million. This addition to the M.D Anderson will add 185,000 square feet to the huge center. The rapid construction growth taking place on the west side of Houston can be attributed to the presence of energy companies in the area. A study conducted by Va-Based Delta Associate shows that this area alone contains 31 million square feet, the largest space of the 252 million square feet of office space in the entire Houston area.
Washington DC has numerous neighborhoods that are being renewed with retail and office spaces. Construction has witnessed an incredible growth within its neighborhood with McGrow Data showing starts through October 2013 at $1.046 billion compared to the +$4 million from the same period the previous year. The Department of Homeland Security is being re-developed in the Anacostia neighborhood on the southeastern side of Washington DC. The facility will offer space for more than 14,000 workers.
The City Market at O is also another project started this year and is planned to be completed by 2014. It is located in the Penn Quarter, near Gallery Place, and has an estimated cost of $300 million. The project will comprise of 87,000 square feet of retail space and 500 parking spaces. Other construction projects taking place in Washington include the Dwight D. Eisenhower Memorial, the National Law Enforcement Memorial Museum at 400 block of E Street, and the White House Visitor Center at 1450 Pennsylvania Ave. The biggest project in development is the Alterations to the International Monetary Fund Headquarters. There are many other construction projects taking place in Washington DC that are worth mentioning.
Atlanta is another city that is buzzed with new office space construction projects. The city has witnessed a 3% growth since 2011, and still has numerous projects in the pipeline. Although the first quarter of 2013 only saw a very slow growth in the Office Space market, the later part of the year has witnessed some growth with new market offices. This is due partly to the city’s commitment to add 39,000 new jobs in 2013. Construction of new office spaces is mostly done in the submarket sector with the largest projects being mixed-use with both residential and retail components. Some of such projects include the Oliver McMillan’s Buckhead Atlanta and Jamestown’s Ponce City Market in Midtown.
There are also built-to-suit office projects such as Porsche in South Atlanta and Primerica in Northeast Atlanta. The Baxter Blood Plasma Fractionation Plant is one of the largest construction projects taking place in Atlanta. It’s a $1 billion plant for the manufacturing of biological medical treatments. The construction of the 1 million square-foot facility started in 2013, and the first buildings are planned to be completed by 2015. The construction of this plan will continue till 2016 but production will only start in 2018.
The largest commercial project in Los Angeles is the Renovation of Delta Terminal 5. The $229M renovation that will take place in different stages will change the look of the terminal. In downtown Los Angeles, the mixed-use Wilshire Grand is rising to be one of the tallest buildings in the area. The office and hotel project is developed by Korean Air Lines Co., and contains 73 stories, rising 1,100 feet tall, and featuring an architectural tower at the top that is very distinctive.
The Century City Center is another new office construction project proposed in Los Angeles. Developed by JMB Realty, it is one of the few office buildings in the area. Although the construction of this office building has met with a lot of controversy and opposition from rivals like JP Morgan Chase, it will be one of the major office space projects to rise next to Constellation Place and Sun America Center. The Century City Mall Residential Tower is another iconic building that is to add to the overall beauty of Los Angeles skyline. Originally proposed as an extension of the Westfield Century City Mall, it will be a 39 story building with 282 rooms.
According to a report published by Marcus & Millichap, there is a lower vacancy rate in office space and increased rents during the second half of 2013. With the improved economic condition, it is estimated that the office vacancy rate will drop by 0.8% in Miami. Statistics show that new construction projects taking place in Miami will add approximately 5,500 new units to the existing market. Key developers in Miami will add 250,000 square feet of commercial space in 2013. Although there are many new office construction projects going on in Miami, the largest one is the Brickell CityCentre.
It is a mixed-use structure that started in 2012, spanning three blocks west of Brickell Ave. It lies on the south of the Miami River. Located in the heart of the city’s financial district, this project will add 240,000 square feet to the existing office space. The first part of the project is expected to be completed in 2015. Investors are taking favorable positions in Miami as the economy continues to improve.
In San Francisco, a line of more than a dozen construction cranes are looming over the skyline. Most of the new construction projects are concentrated on the northeastern part of the city, featuring new office structures and renovations of old ones. One of the major commercial real estate projects underway is the Transbay Transit Center complex. San Francisco General and UCSF Mission Bay are now featuring new hospital buildings. A section of the Market Street is also experiencing great change with new commercial buildings. The starts through October dollar value of new office construction projects is estimated at $1.1 billion, compared to the +$278 million of the previous year.
The IBIS World’s Commercial Building Construction research predicts a huge increase in the commercial construction industry in the next five years. Although the recession has caused a lot of backlogs, the commercial real estate market still experienced a slow, but steady growth. With decreased vacancy rates, new businesses and existing businesses will have to create more space to accommodate workers with the economic recovery. It is worth noting also that most of the large office construction projects are taking place in the limited markets and it is taking place outside downtown areas. Metro areas like Houston, with robust job growth, there are new commercial construction projects taking place, but most of them are on the periphery of the city.
Although some areas are witnessing a mini-boom in the construction of new office space, the situation will not change much if the economic recovery continues to be modest. The above list of cities with a lot of commercial real estate projects is not exhaustive. There are many other cities with great new office construction projects taking place. This list only highlights some of the major projects in the market. Although the progress is slow, it offers great hope for the future of the US economy.
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