Key Takeaways
- • Office developers are actively initiating projects in 2019 with delivery timelines targeting 2022, positioning portfolios ahead of anticipated market strength despite near-term headwinds expected in 2020-2021.
- • Market participants are forecasting a cyclical pause in office development activity during 2020 and 2021, followed by robust demand recovery in 2022.
- • Developer strategy reflects confidence in long-term office market fundamentals, with construction starts being timed to capture the projected 2022 upturn in leasing and occupancy demand.
Summary
Office developers are moving decisively to launch new projects today with completion dates aligned to capitalize on what industry forecasters expect to be a substantially stronger office market in 2022. According to GlobeSt.com's exclusive reporting, this represents a counterintuitive strategy in which developers are building through anticipated market softness to position inventory for peak demand conditions.
The market consensus reflected in developer activity suggests a cyclical downturn is expected in 2020 and 2021, creating a temporary pause in new office completions. Rather than wait out this slowdown, major developers are front-loading project initiation now to ensure pipeline readiness when market conditions improve. This approach signals underlying confidence in the structural strength of office real estate demand and reflects sophisticated timing of construction to match projected leasing cycles.
The strategy underscores a critical calculus in commercial real estate development: lead times for permitting, construction, and pre-leasing typically span 24-36 months. By commencing projects in mid-2019, developers position themselves to deliver space when tenant demand, rental growth, and occupancy rates are forecast to accelerate. This capital deployment pattern indicates that despite near-term market caution, industry participants maintain conviction that 2022 will present a favorable environment for newly completed office assets.
The market consensus reflected in developer activity suggests a cyclical downturn is expected in 2020 and 2021, creating a temporary pause in new office completions. Rather than wait out this slowdown, major developers are front-loading project initiation now to ensure pipeline readiness when market conditions improve. This approach signals underlying confidence in the structural strength of office real estate demand and reflects sophisticated timing of construction to match projected leasing cycles.
The strategy underscores a critical calculus in commercial real estate development: lead times for permitting, construction, and pre-leasing typically span 24-36 months. By commencing projects in mid-2019, developers position themselves to deliver space when tenant demand, rental growth, and occupancy rates are forecast to accelerate. This capital deployment pattern indicates that despite near-term market caution, industry participants maintain conviction that 2022 will present a favorable environment for newly completed office assets.
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