Drop in office construction could drive up rents

Should the construction of new commercial real estate properties - specifically, office buildings - remain stagnant during 2012, the Wall Street Journal reports rents could grow significantly around the country.

Should the construction of new commercial real estate properties - specifically, office buildings - remain stagnant during 2012, the Wall Street Journal reports rents could grow significantly around the country.

According to the paper, one issue surrounding the office real estate market is demand. When it's high, new buildings are ordered to be built, but that takes years, in some cases. The Journal notes that while these buildings are constructed, vacancies typically continue to fall, thus raising the cost to lease.

An official familiar with the market told the Journal it is often difficult to predict how the sector will unfold amid any market conditions.

"Aligning office construction with future demand can be really inefficient," Tad Philipp, Moody's Investor Service's director of commercial real estate research, told the newspaper.

Aside from the prospective hike in rents for office real estate nationwide, the paper says many in the CRE industry are concerned with the number of older buildings throughout the U.S. Some urban planners are reportedly concerned about the lack of newer buildings being constructed.

Real estate records from the Commerce Department indicate construction spending on new office buildings finished 2011 stable from the month and year before.



blog comments powered by Disqus