U.S. Office Space Set for Net Decline as Deliveries Slow, Conversions Accelerate
A lack of new construction and a glut of aging office space being repurposed or destroyed will lower the amount of office space nationwide, Bloomberg News reported Thursday, citing a report from JLL. Less than five million square feet of new offices broke ground in the U.S. year to date, while 14.7 million square feet has been removed, often for conversion into buildings for other uses.
“Conversions are being driven partially by a converging of valuations between office assets and multifamily assets, but a more significant catalyst has been shifting incentive and regulatory structures in major cities,” JLL said in its second-quarter office outlook report.
Specifically, “many of the largest office markets in the U.S. are creating financial incentives for adaptive reuse of office buildings and attempting to lower regulatory barriers.”
Although 85 million square feet of office space is under construction for delivery in the coming years, and 12.4 million square feet was delivered during Q2 alone, JLL forecasted that new construction deliveries will begin to decline “precipitously” from 2025 through 2027.
“At that point in time, it is likely that supply constraints in new construction will both intensify the existing flight to quality among occupiers, but also drive spillover demand into secondary tiers of quality,” the report stated.
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).