U.S. Office Construction Sunk to 10-Year Low in 2024: Report

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The U.S. office market is stuck and appears it will be so for some time. 

Construction of office supply declined 44 percent last year, reaching a 10-year low, as 2024 delivered on 43.2 million square feet of new office space nationwide. That’s the lowest annual total since 2013, and far below the 97 million square feet delivered during what in comparison appears to be a boom time in 2023. 

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The discouraging data on the health of national office supply comes from Yardi Matrix, a commercial real estate data analytics firm that analyzed office buildings larger than 25,000 square feet. 

Yardi Matrix’s end-of-the-year report emphasized how low supply metrics reflect a sweeping decline in demand for new office product: 2024 contained only 9.8 million square feet of new construction starts, compared to the 83 million square feet in new starts recorded in 2019, the year preceding COVID-19 and prior to the national shift in work patterns. 

“Attitudes from workers, who have built their lives around a new remote-work model, remain entrenched on this issue,” wrote the report’s authors. “Despite media buzz around major U.S. companies demanding a return to the office, it is unlikely any large-scale cultural change will happen soon, especially considering many workers in their 20s have only ever known a remote-work environment.”

All told, as 2025 opens, there are 54.7 million square feet of office space under construction in the U.S. — less than 1 percent of the total national stock.  

Some cities and their surrounding regions remain more loyal to new office supply than others, however. 

With 8.7 million square feet of construction planned, the Boston metropolitan region currently leads all U.S. metropolitan statistical areas in new supply, followed by the San Francisco/Bay Area (3.7 million square feet), Austin, Texas (3.5 million square feet), and San Diego (3 million square feet). 

Regions that carry discouraging new construction metrics include Detroit (553,680 square feet), Charlotte (426,076 square feet), and the Twin Cities in Minnesota (426,076 square feet). Portland, Ore., has merely 63,899 square feet of new office space under construction, according to Yardi Matrix. 

“2025 will be another tough year for office, and the worst may not yet be in the rearview mirror,” wrote the authors. “We are in the early innings of a multi-decade transformation, with the sector still adapting to the post-pandemic world.”

The supply crisis will only deepen in the coming years. While just over 54 million square feet of new office is forecast in 2025, that metric declines to less than 30 million square feet in both 2026 and 2027, and fails to rise above 40 million square feet even by 2029

The main reason office supply has sunk so far is that vacancies have remained persistently high, even years after COVID-19 has abated and return-to-work mandates have become the norm. U.S. national office space ended 2024 with a vacancy rate of 19.8 percent, up 150 basis points from where it ended 2023. 

Regions with the highest vacancy rates in the last year included San Francisco (28.8 percent), Austin (27.9 percent) and Seattle (26.3 percent). Houston, Dallas, Denver and Detroit metropolitan statistical regions all ended 2024 with office vacancy rates of roughly 24 percent.  

By comparison, the nation’s three largest metropolitan centers — New York, Los Angeles and Chicago — carried office vacancy rates between 16 percent and 19 percent, better but still troubling. 

The Yardi Matrix researchers argued that any decreases in vacancy going forward will occur due to outdated offices becoming obsolete or undergoing residential conversions, not from swift increases in occupancy or new demand. 

“We do not anticipate that vacancies will fall this year despite high-profile return-to-office mandates from major corporations,” wrote the authors. “Office utilization rates, though imperfect, have plateaued in the last two years, indicating a permanent adoption of remote and hybrid work.”

Brian Pascus can be reached at bpascus@commercialobserver.com