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Sr. Economist Michael Guckes adds context to Office Starts data
ConstructConnect Senior Economist Michael Guckes says the commercial office space segment will remain under pressure in 2024, and the data reveals more to the story. He pointed to February Construction Starts, where the office category failed to hit the $1 billion mark, and April’s numbers, which registered $490 million, the lowest in over a decade.
The March results appeared more robust, clocking in $3 billion. However, Guckes noted that two data centers accounted for nearly half of office space starts for March. Those projects were Facebook’s 2.7 million square foot, $800 million center in Los Lunas, New Mexico, and Edgecore’s two-building, $630 million Mesa, Arizona data center
Data through May 31, 2024
Guckes stated that within the Office Starts category, there is a surge in data center funding, partly fueled by the rush to build structures for artificial intelligence. At the same time, the economist adds, “sustained interest rates and falling existing office CRE prices are working against traditional new office construction.” However, these later forces, he said, “have caused heightened interest in buying and renovating existing office structures, as they appear more favorable than building a new one.”
While the category appears strong from mixed data, Guckes indicated that the most prudent construction firms operating in traditional office space construction may want to pay extra attention to renovation space opportunities.
Read the monthly Construction Economy Snapshot for more information on Construction Starts and economic analysis from Sr. Economist Michael Guckes.
