Adaptive Spaces

Sun Belt, Technology Markets May See Heightened Competition for Class A Stock

May 9, 2022

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New development is a strong indicator of where investors are willing to bet on the future. More than one-quarter of Class A stock in the top six markets (Figure 1) was built in the past decade. A heavy bias toward high-growth Sun Belt and technology markets is notable.

CBRE Econometric Advisors believes Class A landlords in markets with abundant new space will have to compete more intensely to secure tenants that may be shrinking their overall footprint due to the rise of remote work. The competition in larger markets where less space has been built recently – such as New York, where only 8% of the total inventory has been developed since 2010 – may be less intense.

Sustainability adds another dimension. The high cost of decarbonizing older office buildings may create valuation pressures in markets with a concentration of older stock, strengthening the competitive position of owners of newer properties.

FIGURE 1: Share of Class A Office Space Constructed After 2010

Costar, CBRE Econometric Advisors

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