{"id":1004781852,"date":"2025-12-17T09:34:35","date_gmt":"2025-12-17T17:34:35","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004781852"},"modified":"2026-03-25T12:47:42","modified_gmt":"2026-03-25T20:47:42","slug":"how-office-developments-returning-to-the-top-tier","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/how-office-developments-returning-to-the-top-tier\/","title":{"rendered":"How Office Development’s Returning to the Top Tier"},"content":{"rendered":"
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Rendering of an office suite at BXP’s 343 Madison Ave., which broke ground last July. Rendering courtesy of BXP<\/em><\/figcaption><\/figure><\/div>\n\n\n

Office remains one of the least favored asset classes on many investors\u2019 lists due to the overhang of space nationally and a cloudy long-term outlook for the product type. But a handful of recent development projects are proving there’s a robust market for deluxe tailor-made office space, and a few markets even justify breaking ground on Class A+ space without a tenant.  <\/p>\n\n\n\n

Based on our research, there are 12 large office development projects\u2014400,000 square feet or more\u2014recently completed, under construction or planned in cities from New York to San Francisco. While five of these projects are tenant-driven, seven are developer-driven or spec. All seek to capture tenants’ willingness to pay up for the best office space possible.<\/p>\n\n\n\n

\u201cAmenities have been key in attracting workers back into offices,\u201d said Markus Shayeb, senior vice president & San Francisco managing director at TRI Commercial Real Estate Services\/CORFAC International, noting large amounts of funds are being invested in tenant lounges and amenities and infrastructure, like increased power capacity. \u201cSuch expenditures are often not justified for older buildings as most do not have the size or rental incomes to justify the cost.\u201d<\/p>\n\n\n\n

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While construction costs have risen more than 50 percent over the last five years, slower construction activity is beginning to generate labor-cost adjustments, and the comeback of major banks to real estate funding is also helping to drive new office development, Shayeb suggested. <\/p>\n\n\n\n

What’s being built and why<\/h2>\n\n\n\n

The projects that are underway or recently completed do not portend any kind of development boom. According to Yardi Matrix’ November office report<\/a>, the national under development pipeline comprised 33.4 million square feet in October, representing 0.5 percent of existing stock and 1.7 percent when adding projects in planning or proposal stages. Office construction starts through October were 12.9 million square feet\u2014on par with last year. But this collection of high-end properties decked out with all the latest amenities are noteworthy and a positive sign for the office market.<\/p>\n\n\n\n

Five recent skyline additions have been tenant-driven: the 800,000-square-foot Mutual of Omaha Headquarters Tower in Omaha, an 800,000-square-foot Goldman Sachs Campus in Dallas, a 1.1 million-square-foot office project at New York City\u2019s 70 Hudson Yards that will serve as Deloitte\u2019s new North American headquarters and the 2.5 million-square-foot 270 Park Avenue, JP Morgan Chase\u2019s new global headquarters and Manhattan\u2019s first all-electric, net zero building.<\/p>\n\n\n\n

And Detroit got its first new office building since the 1980s thanks to GM, which is relocating its headquarters to a new 12-story office building being developed by Bedrock. The office building anchors a mixed-use development that includes a residential and hotel tower, which on completion will be the second-tallest building in the city. The project provides 400,000 square feet of office space, including a new, four-level global headquarters for GM and a 56,000-square-foot event venue.<\/p>\n\n\n\n

But, by our count, seven developer-driven office buildings are also underway in Manhattan, Austin and San Francisco. All of these markets are still struggling with an overall excess of office space. Austin and San Francisco have some of the highest vacancies in the country. But there is a shortage of the state-of-art office space large employers require. Some developers are banking on that shortage and putting shovels in the ground. Here’s a closer look at those projects.<\/p>\n\n\n\n

BXP’s 343 Madison Ave. in NYC<\/h2>\n\n\n
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343 Madison Ave. features 930,000 square feet of office space, a double-height lounge and conference space on the 45th and 46th floors, indoor and outdoor dining, social and collaboration spaces, biophilic terraces overlooking Midtown Manhattan, a ground-level caf\u00e9, bicycle storage and cabanas and showers. Rendering courtesy of BXP<\/em><\/figcaption><\/figure><\/div>\n\n\n

Manhattan\u2019s overall office vacancy is 13 percent, down 370 basis points from a year ago, according to Yardi Matrix, and much of the recovery has been in Midtown Manhattan, where rents are averaging $200 per square foot. The flight to quality and an “in-office presence that\u2019s organic to the city” has re-awakened the submarket post-COVID, said Nick Farmakis, vice chair in the New York office of Savills.<\/p>\n\n\n\n

\u201cOver the last year, vacancy has dropped to 15 percent and rents in Midtown (on average $200 per square foot) have evolved to a point where it would seem pretty obvious to go ahead and build on spec,\u201d Fermakis said.<\/p>\n\n\n\n

Yardi Matrix\u2019 November Office Market report cited Manhattan as a bright spot for in-office work among 25 metros surveyed, with just 11.8 percent of office employees working remotely 100 percent of the time.<\/p>\n\n\n\n

That momentum led BXP to announce it was moving ahead on the development of 343 Madison Ave.<\/a> in Manhattan without any preleasing. The $2 billion, 46-story tower with direct access to Grand Central will deliver 930,000 square feet of office space.<\/p>\n\n\n\n

BXP broke ground on the entrance to Grand Central and that has been completed. The company plans to break ground on the office tower in early 2026.<\/p>\n\n\n\n

\u201cWith the demand in the market specifically circling around that building, obviously the landlord is comfortable enough to start the development process,\u201d Farmakis noted.<\/p>\n\n\n\n

Once the project begins preleasing, BXP is expected to seek construction financing. C. V. Starr & Co., an insurance and investment firm, is expected to sign a deal for 300,000 square feet to become the project\u2019s anchor tenant, Fermakis said.<\/p>\n\n\n\n

The environmentally friendly project, with zero on-site combustion, a high-efficiency, direct outside air system, climate resiliency, decarbonization and health and wellness features, offers hospitality-style amenities.<\/p>\n\n\n\n