NewsUnderstanding Housing Inventory and What It Means for Development
New construction is commanding a significant rent premium of 64% over average Class A submarket rents, and 20% over existing top-tier trophy assets, according to a construction report issued by Cushman & Wakefield, surveying 24 select office projects currently under construction in 12 major US markets and Toronto.
Peter Curry, real estate practice partner, Farrell Fritz, tells GlobeSt.com that the planning process and land use approval timetable for office buildings that are coming online in 2022 and 2023 “almost certainly” commenced prior to the pandemic.
“Even pre-COVID, developers were trying to figure out what amenities new office buildings would include,” Curry said. “The builders that are completing these new projects must have decided on what innovative designs would attract prospective tenants, and built accordingly.
“Even so, they probably made some adjustments mid-construction to respond to the pandemic. I anticipate a slowdown in planning and designing new ground-up projects, as developers (and their lenders) try to figure out what will bring tenants, and tenants’ employees, back to offices.
Curry said that “front and center will be state-of-the-art air filtration systems, energy savings infrastructure, and a retreat from open-space planning. But they will also need to help tenants adapt to an employee base that will almost certainly work remotely for part of each work week.”
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