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.
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
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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Commercial Office Market Shouldn't Suffer from Housing's Woes
April 20, 2010