Infographics Graphic

Article

Handy Reference Guide to Office Building Construction Starts, U.S. and Canada

0 121 Economic

by Alex Carrick

This is the fourth article in a ‘Handy Reference Guide’ series that has previously highlighted ConstructConnect’s construction starts statistics for roads, hospitals and educational projects.
2017-03-09-Office-Building-Graphic

This time it is office building work that is under the microscope with the accompanying table setting out results for all states in the U.S. and almost all the provinces of Canada. The findings for the four jurisdictions on Canada’s East Coast – Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick − are combined in the Atlantic Region.

The left-hand side of the dividing line in the table sets out annual average volume levels for the six years from 2010 to 2015, as well as average annual percentage changes. The right-hand side shows results for the most recent year, 2016, both with respect to dollar volume levels and year-over-prior-year improvements (or deteriorations).

The volumes in the table are the summations of private offices and government offices. The former usually accounts for a larger percentage of the whole in the U.S., ranging from a low of just over 50% to a high of about 70% over the past seven years.

In Canada from 2010 to 2015, the private component of total offices recorded greater variability, swinging from 40% to 80%. Within the context of a poor economic climate north of the border in 2016, − due largely to weak commodity prices, especially for oil – the private-to-public split last year was an abnormal 33% to 67%.

The problem can be easily perceived when one considers the following circumstance. According to several major commercial real estate research firms, the office vacancy rate in Calgary – home to the second highest (i.e., behind only Toronto) concentration of head offices in Canada – has presently skyrocketed to 25.0%.

A figure of 10% is usually taken to be a good benchmark for when office supply and demand are  in reasonable balance, although the yardstick for suburban space is almost always looser (i.e., plus 300-to-500 basis points, where 100 basis points = 1.00%) than for downtown cores.

Returning to the results in the table, total U.S. office building construction starts grew at an average annual rate of +5.9% during the six years from 2010 to 2015. In 2016, they more than doubled that pace, increasing to +14.3% year over year.

What about the geographical distribution of starts? On average from 2010 to 2015, the largest dollar volume of office building construction starts occurred in the South Region ($8.4 billion USD), although both the Northeast ($6.9 billion) and the West ($6.7 billion) stayed in the hunt for top spot. The Midwest ($3.6 billion) was a laggard relative to the frontrunners.

With respect to annual average percentage changes, the Northeast did best from 2010 to 2015, at +22.3%, with the West in second place, +11.0%. The Midwest (+4.2%) made minor headway, but the South (+0.3%) was caught in a standstill.

The South made amends in 2016. Its office building starts last year compared with 2015 were a marvelous +65.1%. Its dollar volume of office starts in 2016 ($13.7 billion) was almost double what was rung up by the region that was next best, the West ($7.0 billion).

The Midwest also had an outsized percentage gain in year-over-year office starts in 2016, +35.1%. The West, at -0.1%, stayed flat and the Northeast slipped by an amount approaching one-third, -29.9%. After a prolonged period of major project initiations in the City of New York (+88% per year on average, 2010 to 2015), office groundbreakings in the Big Apple took a big pause to regroup in 2016 (-60.5%).

Canada’s total office building starts soared by +16.9% per annum, on average, from 2010 to 2015. But in 2016, they fell into retreat nation-wide, -41.6%. The rout last year was most severe in Alberta, -80.6%, although British Columbia – which had managed to achieve a +42.1% performance on average from 2010 to 2015 – also stumbled badly, -73.4%.

Two provinces achieved upticks in 2016 relative to 2015: Manitoba (+196.9% or a tripling of its office starts volume) and Ontario (+33.9%). The large percentage gain in Manitoba was mainly a mathematical anomaly. 2015’s base level (i.e., as the standard for comparison) was so low as to be almost insignificant.

According to CBRE Research, Toronto currently has the tightest office vacancy rate in its core district, 4.4%. Vancouver and Winnipeg also have limited empty ‘cubicle’ space, at 7.7% and 8.9% respectively.

Again as reported by CBRE, Oakland (4.1%), parts of Manhattan (6.3% to 9.3%), Austin (6.7%), San Francisco (6.9%), Boston (7.2%), Charlotte (8.2%), Seattle (8.4%) and Portland (also 8.4%) are the urban centers in the U.S. with the least room to wander around their downtown water coolers.

Table 1: ConstructConnect's Office (Private + Government) Construction Starts
United States ($ volumes are in billions USD)
Annual Average Average Y/Y
$ Volume % Change
Previous 6 Years Previous 6 Years 2016 2016 versus
(2010 to 2015) (2010 to 2015) $ Volume 2015 (Y/Y)
Connecticut $0.241 4.8% $0.243 -8.0%
Maine $0.093 46.4% $0.069 46.4%
Massachusetts $1.229 31.7% $0.791 -36.8%
New Hampshire $0.056 10.4% $0.047 -5.1%
Rhode Island $0.049 26.2% $0.075 25.7%
Vermont $0.079 28.3% $0.013 -80.1%
Total New England $1.746 16.2% $1.237 -28.8%
New Jersey $0.668 21.0% $0.560 -12.7%
New York $3.673 88.3% $2.164 -60.5%
Pennsylvania $0.821 7.8% $2.062 182.1%
Total Middle Atlantic $5.162 33.2% $4.785 -30.2%
TOTAL NORTHEAST $6.908 22.3% $6.022 -29.9%
Illinois $0.756 31.2% $0.608 93.5%
Indiana $0.140 14.4% $0.304 42.1%
Michigan $0.235 8.1% $0.525 50.8%
Ohio $0.607 4.2% $0.656 44.8%
Wisconsin $0.331 22.1% $0.427 -7.6%
Total East North Central $2.070 3.6% $2.519 40.7%
Iowa $0.339 152.8% $0.177 98.4%
Kansas $0.164 80.0% $0.137 12.5%
Minnesota $0.380 12.2% $0.568 85.1%
Missouri $0.338 36.9% $0.450 -28.6%
Nebraska $0.151 34.4% $0.223 63.8%
North Dakota $0.073 36.8% $0.184 149.2%
South Dakota $0.061 15.3% $0.073 30.8%
Total West North Central $1.507 11.4% $1.813 28.1%
TOTAL MIDWEST $3.577 4.2% $4.332 35.1%
Delaware $0.036 1.8% $0.071 307.4%
District of Columbia $0.859 7.6% $1.897 685.4%
Florida $0.767 1.4% $1.142 44.6%
Georgia $0.383 1.8% $0.795 71.8%
Maryland $1.177 26.1% $1.492 315.4%
North Carolina $0.469 4.3% $0.740 50.5%
South Carolina $0.256 36.5% $0.245 -34.5%
Virginia $0.924 7.0% $1.359 80.6%
West Virginia $0.124 51.3% $0.118 20.6%
Total South Atlantic $4.994 -2.8% $7.859 119.1%
Alabama $0.278 34.5% $0.323 157.9%
Kentucky $0.117 19.1% $0.188 48.4%
Mississippi $0.121 -4.9% $0.132 146.1%
Tennessee $0.302 21.0% $0.475 5.0%
Total East South Central $0.818 -0.5% $1.118 47.5%
Arkansas $0.104 20.9% $0.161 -5.5%
Louisiana $0.190 0.1% $0.220 13.2%
Oklahoma $0.229 0.7% $0.569 132.0%
Texas $2.109 27.6% $3.738 12.4%
Total West South Central $2.632 15.8% $4.687 19.2%
TOTAL SOUTH $8.444 0.3% $13.664 65.1%
Arizona $0.235 29.9% $0.398 53.1%
Colorado $0.533 62.5% $0.525 19.0%
Idaho $0.106 28.1% $0.120 -20.3%
Montana $0.051 19.4% $0.070 -23.3%
Nevada $0.112 44.9% $1.084 2323.0%
New Mexico $0.143 21.3% $0.111 -10.8%
Utah $0.558 36.7% $0.486 -0.7%
Wyoming $0.098 72.6% $0.045 -87.1%
Total Mountain $1.836 15.6% $2.838 45.6%
Alaska $0.069 18.6% $0.158 150.0%
California $3.338 31.8% $2.566 -20.6%
Hawaii $0.110 44.4% $0.139 1.9%
Oregon $0.358 28.6% $0.502 -25.1%
Washington $1.010 61.0% $0.751 -22.7%
Total Pacific $4.886 17.1% $4.116 -18.9%
TOTAL WEST $6.722 11.0% $6.954 -1.0%
TOTAL U.S. $25.651 5.9% $30.972 14.3%
Canada ($ volumes are in billions CAD)
Annual Average Average Y/Y
$ Volume % Change
Previous 6 Years Previous 6 Years 2016 2016 versus
(2010 to 2015) (2010 to 2015) $ Volume 2015 (Y/Y)
Atlantic Canada $0.104 71.5% $0.084 -22.9%
Québec $0.485 20.3% $0.415 -34.5%
Ontario $0.940 16.0% $1.074 33.9%
Manitoba $0.082 18.0% $0.078 196.9%
Saskatchewan $0.096 -12.4% $0.012 -58.5%
Alberta $0.632 33.9% $0.263 -80.6%
British Columbia $0.447 42.1% $0.165 -73.4%
TOTAL CANADA $2.786 16.9% $2.091 -41.6%
Data source: ConstructConnect Insight.
Table: ConstructConnect.

Leave a comment

Or register to be able to comment.

Copyright ConstructConnect TM. All rights reserved. "ConstructConnect" is a dba for CMD Holdings.
The following rules apply to the use of this site:
Terms of Use and Privacy Statement