New office construction is on the downside in almost every region of the country, according to a new industry report, reflecting an ongoing decline in demand first seen during the Covid 19 pandemic.
In its just released National Office Report, the Yardi Matrix company notes that central business districts are continuing to struggle as “falling listing rates and high vacancy levels persist.”
The problem has been exacerbated by moves on the part of the Trump administration to move government agency offices into suburban locations. In April, the President signed an executive order called Restoring Common Sense to Federal Office Space that revoked earlier federal initiatives prioritizing central business districts “when site-selecting for federal offices.”
Pointing to inefficient and costly practices, the Trump order has tasked federal agencies with securing “cost-effective facilities,” while focusing on “successfully carrying out their missions for American taxpayers.”
The federal government, notes the report, is not the only sector exiting central business districts. New office inventory in such districts “fell 42% year-over-year to just under 4 million square feet in 2024, the lowest since 2016.”
Currently, Boston, San Francisco, and Austin lead the way in new office space construction, with the percentage of stock being built ranging from 2.0% to 3.4%.
While the most activity is being seen in cities across the South, Phoenix is experiencing a sluggish 0.5% increase in projects currently being built, followed by Denver at 0.4%.
The overall national supply forecast, meanwhile, is expected to see a drop to around 30 million square feet in 2026, followed by a slow upward trend that will top out at around 36 million square feet in 2029.
The increase in central business district office vacancies, notes the site Plantizen, carries with it a “wide-reaching ripple effect, such as the loss of revenue for cities and available parking sitting empty.”
As the price of existing office properties declines–the Yardi Matrix reports notes a 30-story Chicago building that recently sold for $63 million, down from $182 million in 2018—opportunities may be abundant.
“Although we expect a continuation of steep discounts from some central business district properties, others have been able to maintain occupancy and adequate cash flow throughout the challenges created by Covid,” says the report.
“The right property in the right location can continue to thrive in the current environment,” the report adds.
May 29, 2025
By Garry Boulard
Photo courtesy of Unsplash
