Tech Sector Decline Saps Office Construction Comeback
Date Posted: December 7, 2022
Posted In: News, Workforce,
From Construction Dive: Dive Brief: In-office occupancy, a measure of people physically going into the office, rose to the highest level in November since the pandemic began despite challenging macroeconomic conditions in the office sector, according to a report from New York City-based commercial real estate advisory firm Newmark.
Those macroeconomic challenges will likely cause overall investment activity in the office sector to slow further, according to the report. In the third quarter of 2022, office investment activity decelerated once again, down roughly 6% quarter over quarter.
“I think it’s a good time to be conservative with your underwriting,” David Bitner, executive managing director of global research at Newmark, told Construction Dive. “We will see a broader deceleration in development activity.”
Dive Insight: Tech slowdowns continue to affect the commercial construction market, particularly the outlook for the U.S. office market.
Technology companies accounted for 40.5% of all leasing activity through the third quarter of 2022. That means hiring freezes and slower growth expectations in the tech sector are beginning to take a toll on the office construction market outlook.
“The bigger issue actually is that [tech] firms would lease more space than they needed at the time of the lease to give themselves substantial room to grow,” said Bitner. “Now, in this current macroeconomic environment, they’re expecting to grow less.”