Dive Brief:
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A Metropolitan Washington Council of Governments report found that commercial construction plunged 31% last year in the Washington, DC region due largely to a lack of office development, according to WTOP.
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Office building demand has declined in recent years, as the city's office vacancy level reached 14.9% in 2015 — its highest rate in two decades.
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Overall commercial construction in Washington dipped by more than 3 million square feet last year, as the industrial sector — including warehouses and data centers — was the only commercial segment to rise in 2015.
Dive Insight:
The Council of Governments cited "stagnant job growth" and declines in federal procurement as two main reasons for the weak office demand, according to WTOP. Despite weak office demand in recent years, developers have been undeterred from building in the Washington market, as they expect tenants to return.
Last year, construction giant Skanska announced three separate DC office projects it planned to build on spec — which the Washington Business Journal called a "bold move given the stage of DC's recovering but still sluggish office market." However, Skanska executives said they didn't see the project as risky, as they expect the buildings to draw wide interest from potential tenants. In fact, in September, a Skanska executive announced plans to expand the company's property development business into new U.S. markets in response to its forecast of growing demand for office space.
Although the Washington area experienced declining office construction last year, the recent American Institute of Architects' Consensus Construction Forecast found that the office sector — along with hotels and amusement/recreation — will drive overall nonresidential construction growth through 2017.
