Commercial Office Market Shouldn't Suffer from Housing's Woes
WAYLAND, MA-The housing bubble that let to the Great Recession and is still holding the economy back has no parallel in the commercial office market, a report in the April 19 issue of The Zweig Letter, reveals. The main reason, American Institute of Architects Chief Economist Kermit Baker told The Zweig Letter, is that the non-residential market in general didn't fall victim to the speculative overbuilding that led to the housing bubble.
While demand for office property is scant now-leading to high vacancy rates and falling rents-as the economy recovers and employment picks up, that market will likely bounce back quickly.
"I think we'll have a fairly healthy rebound," Baker says. "By the end of the year we could see some reversal in construction starts."
For architecture and engineering firms working in the office market, the lack of demand has meant mostly "paint and carpet jobs," as renters stay put and landlords try to retain them. Moreover, firms have started looking beyond their comfort zones to secure backlog.
"We started to pursue work outside our traditional market area five or six years ago," said Guy Geier, a senior partner with FXFOWLE Architects in New York. "The firm had basically been known in the New York market and not much beyond that. We felt we couldn't limit ourselves geographically."
Also, "We're doing and pursuing work overseas pretty aggressively," Geier said, listing projects in Saudi Arabia, Abu Dhabi, India, and China.
Gary Kirkbride, senior vice president with the Infrastructure Engineering Services practice at Dewberry in Fairfax, VA, told The Zweig Letter that the office market is still dormant, with demand for upfront site services such as feasibility studies, planning, rezoning, and building permits remaining weak. "We're certainly not seeing anybody going out and starting speculative building," he said.
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