A couple of months ago, we conducted an analysis to see which were the top markets for office deliveries during the final leg of 2017. The fall-winter pipeline placed New York City at the top of the list, followed by the tech-driven San Francisco, Plano, Texas, and Cupertino, home to Apple’s new ‘spaceship’ campus. We now thought it’d be interesting to see which cities will add the most office space in 2018, and which are the most notable projects currently under construction. By the looks of it, the Big Apple and San Francisco will remain the main targets for office development throughout the following year.
We used Yardi Matrix data to see what 2018 has in store for the U.S. office market. Our analysis shows that, on a national level, 347 buildings totaling close to 75 million square feet of new office space are on track for delivery next year, 47% of the total pipeline being located in suburban areas. Read on to see where development efforts are concentrated, which cities will add the most office space during 2018, and which are the top 20 projects currently underway.
Office Development Shifts Towards the Suburbs
Close to 35 million square feet of office space will be delivered to the suburbs in 2018, compared to 24 million square feet underway in urban areas, and 15 million square feet headed for the central business districts. The overbuilt and bustling CBDs leave little room for new construction, consequently, investors are shifting their focus towards the suburbs, where vacant land is still available and the potential for large-scale development is bigger. Take Apple’s new corporate campus, for instance, currently underway in Cupertino, Calif., a small town located in Santa Clara County. Apple would’ve had a hard time finding enough space within the San Jose or San Francisco CBDs, to fit its 2.9 million-square-foot campus. The overwhelming demand for quality office space in the Bay Area stems from a surge in the number of tech companies and startups setting up shop in the region. As a result, construction is now focused on suburban areas. Our analysis shows the Bay Area will welcome the largest amount of new suburban office space in 2018–a total of 5.9 million square feet. Check out the top 10 targets for suburban office deliveries in 2018 below:
New York City, California Top Destinations for Office Development in 2018
Once again, New York City rules our list of top 50 cities for office development in 2018, with 15 buildings and 6.8 million square feet of office space currently under construction. San Francisco lands the second spot, with 8 buildings and 4.6 million square feet underway, followed by Washington, D.C., which is set to add 12 properties totaling 3.7 million square feet of new office space in the next year. The fourth spot is occupied by Cupertino, Calif., home to Apple’s new 2.9 million-square-foot campus, which is currently in the final stages of construction and scheduled for completion in 2018. The state-of-the-art campus will actually grow the city’s existing office inventory by 55%, even though the space is non-competitive, as it was built specifically for the tech giant. In fact, California managed to land 14 spots in our list of top 50 cities for office development, with a combined 15 million square feet of space scheduled for delivery in 2018. Rounding out the top 5 is Philadelphia, which is expected to add six new buildings encompassing a total of 2.7 million square feet of new office space in 2018, the most notable development being the new Comcast Technology Center, set to be the tallest building in Pennsylvania.
Check out the full top 50 below, along with an interactive map showing each city and the amount of new office square footage it expects in 2018:
Apple Park Campus Will Be the Largest Office Delivery of 2018
The largest office development to come online during 2018 will be Apple’s 2.9 million-square-foot Cupertino, Calif., home. Dubbed Apple Park, the ‘spaceship’ headquarters is currently underway at 10955 N. Tantau Ave., and is scheduled for completion in the spring. Apple employees actually started moving into the state-of-the-art headquarters in April 2017, even though construction work was still in progress. The four-story, ring-shaped headquarters aims to achieve LEED Platinum certification and will include a total of 9,240 parking spaces for Apple employees.
In New York City, the largest project on track for 2018 delivery is Silverstein Properties’ 3 World Trade Center. Located at 175 Greenwich St., the 80-story, 2.5 million-square-foot tower will include 2.2 million square feet of office space and 300,000 square feet of retail, upon completion in April 2018. Yardi Matrix data shows that the speculative project is subject to an 86-year unsubordinated net ground lease held by the Port Authority of New York and New Jersey, expiring in 2100. 3 WTC also shares 350,000 square feet of underground retail space with the World Trade Center Transportation Hub. The development of 3 WTC was aided by a 20-year, $1.59 billion loan provided by the PANYNJ, issued in four tranches. Group M and Hawksmoor are among the first to sign leases for space within 3 World Trade Center.
The third-largest office project to be completed in 2018 is 55 Hudson Yards at 550 W. 34th St. in New York City. The 51-story, 1.4 million-square-foot Chelsea high-rise is owned by Mitsui Fudosan America and is being developed by Related Cos. and Oxford Properties Group. The spec project will include 13,278 square feet of retail space and is scheduled for delivery in January 2018. The property is expected to earn LEED Gold certification from the USGBC.
The fourth-largest office delivery of 2018 will be the Salesforce Tower at 415 Mission St. in San Francisco. Spearheaded by Boston Properties, the 61-story project will include 1.4 million square feet of office space and 10,400 square feet of retail, and is aiming for LEED Platinum certification. San Francisco-based cloud computing giant Salesforce will be the building’s anchor tenant, but not its only one. The Salesforce Tower’s tenant roster also includes CBRE, Accenture, Vy Capital, Bain & Co. and WeWork.
Rounding out the top 5 largest office completions of 2018 is the Comcast Technology Center in Philadelphia. Located at 1800 Arch St., the glass-clad tower designed by Lord Norman Foster will be the tallest building in the state of Pennsylvania, surpassing Comcast’s current home–the Comcast Center at 1701 John F. Kennedy Blvd. The 60-story skyscraper will incorporate 1.3 million square feet of office space, 230,112 square feet of hotel space, 14,663 square feet of residential space and 2,682 square feet of retail. The Comcast Technology Center also expects to earn LEED Platinum Certification.
Check out the 20 largest office projects to come online in 2018 below:
Methodology
We used detailed Yardi Matrix data to analyze all office projects equal to or in excess of 50,000 square feet currently under construction in the U.S., with completion dates scheduled for 2018. Our analysis, based on data recorded up until November 8th, 2017, includes office spaces in buildings that are used primarily for office purposes (we excluded retail, residential or any non-office spaces within buildings). The New York City pipeline includes the boroughs of Brooklyn and Manhattan only.
Browse the list below for some of the most competitive commercial real estate markets in the U.S. to see the robust inventories they have to offer:
