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Here's Why The Construction Boom Isn't A Problem (Yet)


Don’t fret over speculative construction just yet. CoStar data reveals new speculative office and industrial starts—close to their 10-year peak—and just keeping up with demand.

CoStar director of research Suzanne Mulvee says speculative industrial starts are out in front with over 50% of industrial construction.

But even with a 240% construction hike since 2012, big-box warehouses are barely catching e-commerce demand—and with Amazon’s promised 24-hour delivery, that’s not likely to let up.

Colliers principal David Burden says office sector developers are more tame, depending on the market. With 50% of the new space driven by the tech sector, cities like S.F. are booming.

The hotel sector is market-dependent too—cities like Dallas, Denver and Seattle have seen soaring room revenues, making them hot digs for developers, JLL VP of hotels and hospitality Kent Michaels says.

Select-service hotels are smoking hot right now, making up 75% of new construction.

On the flip side, retail and multifamily are seeing a demand drop. While e-commerce drives new warehouses, it sinks brick-and-mortar retail.

Multifamily is still seeing low vacancies, but units are being filled up by Gen-X'ers and Baby Boomers—the price is just too steep for Millennials. There’ll be trouble (i.e. overbuilding) if vacancies start rising. [NREI]