Note: This article was updated on February 10. Please check the end of the article the corrections that were made to the original stats.
Every year, we draw upon data gathered by CommercialEdge to gauge the status of the office pipeline nationwide, as well as highlight the largest office properties that are due for completion across the largest U.S. markets. This year appears to be primed to maintain the flight to quality as far as tenants’ preferences for office space. Furthermore, the projects currently being developed are increasingly designed with sustainability, smart technologies and state-of-the-art amenities in mind.
Specifically, in the first quarter of 2023, 135 million square feet of office space was under construction, with Manhattan, Boston and Austin occupying the top three positions. Meanwhile, the share of new office developments within the overall inventory was a repeat of last year’s performance: Austin, Texas, heads the list (this time with 8.7%), followed by Charlotte, N.C.; and Nashville, Tenn. Finally, New York City dominates the list of top 20 largest office deliveries of 2023, with five of its six entries being for projects above the 1-million-square-foot threshold.
Click on the highlights in the executive summary below to learn more development insights and details on the largest office projects scheduled for completion this year.
Executive Summary
- Manhattan & Boston lead the list of office projects under construction
- Austin, Charlotte & Nashville on course for largest projected market expansions
- Largest office development in the pipeline is Brookfield’s 2 million-square-foot Midtown tower
- Arlington and Chicago offices highest ranking under construction projects outside of NYC
- Construction of nearly 1 million square feet of Amazon-leased office space on hold in Bellevue
Manhattan & Boston Lead List of Office Projects Under Construction
In the first quarter of 2023, more than 100 million square feet of office space was under construction across 25 major U.S. markets.
Notably, competition is fierce at the top: Manhattan and Boston have been very close in terms of their sheer amount of square feet currently in the pipeline. Both are set to deliver close to 13 million square feet of new office space to their respective markets in the near future.
Closing out the top three, Austin, Texas, has roughly 7.7 million square feet in the pipeline, making this the most active Texas market in terms of office construction. However, Dallas is in hot pursuit with 7.5 million square feet, while the Bay Area; San Francisco; Seattle; and Washington, D.C. all have more than 5 million square feet of office space in the pipeline, as well.
Austin, Charlotte & Nashville Markets Boast Strongest Construction Activity
In terms of inventory increases, the South is once again in the pole position, boosted by a busy construction schedule. More precisely, three markets stand out — Austin; Charlotte, N.C; and Nashville.
First, the 7.7 million square feet of office projects under development in Austin represents 8.7% of the market’s inventory — the largest share of new supply among top markets tracked by CommercialEdge. Moreover, if we factor in planned developments, as well, Austin’s office pipeline swells by an additional 15%.
At the same time, approximately 6.3% of Charlotte’s current stock is made up of new office developments. The large supply present here was determined by several larger properties, with two of the city’s entries being on the list of top 20 largest office spaces under construction. Up next, Nashville’s 3 million square feet of office space under construction resulted in a 5.4% growth compared to the market’s current inventory.
Similarly, Boston and San Diego are also witnessing expansion rates of more than 5% in 2023. In fact, Boston is expected to deliver some 12.4 million square feet of new office space to the market. The most prominent among the ongoing developments in Boston is the Gensler-designed One Post Office Square. Currently owned by Morgan Stanley, the building is scheduled for completion in the first quarter and set to become one of the most attractive assets on the market. Equipped to cater to the most demanding of tenants, One Post Office Square will feature an 18-story addition, as well as an extra 200,000 square feet of downtown Boston office space.
Brookfield’s 2-Million-Square-Foot Midtown Tower Heads List of Largest Office Developments
This year, the top 20 developments in the pipeline are expected to deliver roughly 21.5 million square feet of new office space to major markets across the U.S. And, unsurprisingly, New York City continues to be the focal point of some of the largest office construction efforts in the nation.
More specifically, the five largest office developments at the top of the list are all from New York City, with the largest among them being the 2-million-square-foot skyscraper at Two Manhattan West. Owned by Brookfield Properties, the 935-foot-tall office tower in Midtown is part of a two-building project designed by Skidmore Owings & Merrill. Construction was advancing steadily in the closing days of 2022, and the completion date for Two Manhattan West is estimated to fall within this year’s fourth quarter.
Accordingly, the property has already attracted a diverse roster of tenants, with an occupancy rate around 80%. Namely, law firm Cravath, Swaine & Moore (which has signed on for 481,000 square feet) will be the anchor tenant. What’s more, despite still being in the pipeline, Two Manhattan West has also managed to secure the largest deal signed in Manhattan this year: Accounting firm KPMG has agreed to occupy 450,000 square feet within the building. Other tenants include law firm Crowell & Moring with 71,000 square feet; hedge fund D.E. Shaw with 283,000 square feet; and law firm Clifford Chance with 144,000 square feet.
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In second place, we find Vornado’s PENN 2 redevelopment, scheduled to be delivered by the end of 2023, as well. A massive effort that included new construction and major renovations of existing buildings around Penn Station and Madison Square Garden will add some 1.6 million square feet of space to Manhattan’s office inventory.
Upon completion, PENN 2 will feature a 275-person town hall; casual lounges; an outdoor rooftop pavilion; and a new, triple-height office lobby. The property will also have plenty of outdoor terraces, with the largest located atop the eighth floor.
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Next, One Madison Ave. is the third-largest project in the office pipeline, totaling roughly 1.4 million square feet of space. Located at the corner of 23rd Street and Madison Avenue, SL Green’s 27-story tower is anticipated to be completed by November. Already 55% leased, One Madison Ave. is set to accommodate the needs of the most demanding tenants with on-site amenities such as a DOAS HVAC system that circulates fresh outside air; a stylish, Michelin-star steakhouse; a 7,000-square-foot, tenant-exclusive lounge; and a generous rooftop terrace.
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The other three New York entries on the list are: Google’s 1.3-million-square-foot headquarters at 550 Washington St., which is due by the second quarter; L&L Holding Company’s redevelopment of Terminal Warehouse in West Chelsea; and Amazon’s repositioning of the former Lord & Taylor flagship store at 424 Fifth Ave. as a modern, 12-story boutique office space.
Arlington, Va., & Chicago Offices Claim Highest-Ranking Projects in Pipeline Outside of NYC
Taking a look at entries outside of New York City, the highest-ranking project in the pipeline is Amazon’s HQ2 Metropolitan Park Phases 7/8, located in Arlington, Va. The e-commerce giant broke ground on the site in 2020. Three years later — and after a massive endeavor that required excavating 450,000 cubic yards of dirt and placing 200,000 yards of concrete — the 1.2-million-square-foot property is nearing completion.
Likewise, a similarly sized construction project is expected to wrap up in the first quarter of 2023 in Chicago: The Salesforce Tower — also known as Wolf Point South — is part of three-phase development designed by Pelli Clarke & Partners in downtown Chicago. The 60-story office tower is anchored by Salesforce, which announced plans to move employees in by spring. Law firm Kirkland & Ellis will also be an important presence in the building: It signed a 10-year lease for 27 floors totaling more than 660,000 square feet.
The Hines-owned skyscraper will also provide a variety of coworking spaces in Chicago for local startups and entrepreneurs who are eager for a working environment designed to facilitate interaction and creativity. Built with sustainability in mind, the property is set to receive a Zero Carbon Certification offered by the International Living Future Institute, as well as LEED v4 Gold Certification for both its exterior and interiors. The Salesforce Tower is also designed to be fully electric, thereby requiring no on-site use of fossil fuels.
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That said, not everyone is expanding vertically. For example, life sciences real estate developer IQHQ is expected to deliver its eight-acre campus in the closing months of 2023. Dubbed The RaDD, the $1.5 billion complex in San Diego will consist of several mid-rise buildings and a 17-story tower, as well as a museum and several acres of green space and rooftop decks. Block 2B — which ranked 16th among the largest projects in the U.S. office pipeline this year — will add some 765,000 square feet of new space to the San Diego market.
Construction of Nearly 1 Million Square Feet of Amazon-Leased Office Space On Hold in Bellevue
Some of the largest office projects in the pipeline this year are also reflective of the changes in the business and development landscape following the pandemic.
For instance, one of the properties on our top 20 list of office developments — the 995,000-square-foot 555 Tower in Bellevue — is currently in somewhat of a development limbo. That’s because Amazon, which intended to occupy the building, paused construction on several of its ongoing office projects in the Bellevue area.
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Along the same lines, last summer, healthcare provider Centene announced that it would cancel plans to move into the new headquarters it was building in northeast Charlotte, N.C. The decision raised quite a few eyebrows, as the St. Louis-based company walked away not only from its new base of operations on the East Coast, but also from an unprecedented incentives package for what would have been the single-largest job-creating project in North Carolina’s history at that time. Because Centene will not occupy the 800,000-square-foot office space being developed in Charlotte’s University City neighborhood, negotiations are currently underway to find new tenants or prospective buyers.
In this case, the healthcare giant had pledged a reduction in its real estate portfolio to shareholders last spring, highlighting the changes brought about in the company’s office space needs per the adoption of a hybrid working system, as well as its employees’ satisfaction with the increased flexibility that came along with it.
Clearly, companies are reassessing their commercial real estate portfolios and making decisions regarding the fate of their long-term leases — whether that’s due to a squeeze in available financing for office construction, the adoption of hybrid work, or the wave of significant layoffs that reduce workspace footprints.
Methodology
We based this article on data that we compiled on January 26, 2023, from CommercialEdge. We included only properties equal to or larger than 25,000 square feet and considered properties that are designated either exclusively or primarily for office use (such as mixed-use, including office space). Data presented under the top office developments of 2023 includes under-construction projects with estimated completion dates during this calendar year. Final delivery dates may differ. The square footage shown for each entry represents total property size.
Disclaimer
While every effort was made to ensure the timeliness and accuracy of the information presented herein, the information is provided “as is” and neither CommercialCafe nor CommercialEdge can guarantee that the information provided is complete. This report is for general informational purposes only. It does not constitute and should not be relied upon as a basis for any investment decision. The information presented is subject to change without notice and may or may not apply depending on the circumstances. Always contact a qualified investment consultant if you need advice regarding buying, selling or otherwise transacting in any investment.
Note: A previous version of this article was based on incorrect data regarding the total amount of office space labeled under construction in the Atlanta market. The numbers have been updated on February 10, 2023. The initial total square footage of office space under construction for Atlanta was 12 million square feet due to a development misclassified as under construction.
