American Cities May Have Hit 'Peak Office'

New Geography reports:

The amount of new office space in development is extraordinarily low by historical standards, outside of a handful of markets. Back in the mid-1980s, according to the commercial real-estate research firm CoStar, upward of 200 million square feet of office space was built annually. After dropping precipitously in the early 1990s, construction rose again to 200 million square feet a year in the early 2000s before dropping well under 150 million square feet in 2006, and lower after that. This year, in what is purported to be the middle of an economic recovery, we will add barely 30 million square feet,according to Reis Inc.

Even with this paltry construction, vacancy rates nationwide have barely moved, hovering around 17%. This is nowhere near low enough to justify much more construction in the vast majority of markets, where office rents remain well below 2007 levels.

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