Pandemic-Driven Supply Chain Issues Slowing Delivery
New York, NY – FEBRUARY 18, 2022 – Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm, today released a construction report, surveying 24 select office projects currently under construction in 12 major U.S. markets and Toronto. The report finds that new construction is commanding a significant rent premium of 64% over average Class A submarket rents, and 20% over existing top-tier trophy assets.
“Tenants are demonstrating a strong bias for the highest quality, newly constructed office projects across major US and Canadian markets – they are looking for a fundamentally different, elevated, office experience,” said Rebecca Rockey, Cushman & Wakefield’s Global Head of Economic Analysis & Forecasting.
“These modern buildings built for today’s employees offer a platform for companies to enhance culture through a shared workplace experience that can’t be replicated at home.”
Cushman & Wakefield is forecasting for 48.5 million square feet (msf) to deliver in 2022 and 25.6 msf to deliver in 2023. Delays are factored into these forecasts. Key delivery dates continue to get pushed back as materials are delayed and wait times creep up due to pandemic-driven supply chain issues.
“Even though office construction has come off its peak, it is still at 1.8% of inventory and the historical, pre-pandemic average is 1.3%. Just 10 cities account for over 55% of all construction. It’s not unusual for this kind of concentration to exist, but it does suggest that office supply is not a unilateral risk and depends greatly on local conditions and dynamics,” said Rockey.