BOSTON–The Northeast’s once-booming office development sector is hitting the brakes, with even the nation’s most active construction markets—Boston and Manhattan—experiencing sharp slowdowns, according to the latest CommercialEdge National Office Report.
Boston, which had led the U.S. in office construction activity, saw its development pipeline plummet from 13.9 million to just 6.3 million square feet year-over-year, a staggering decline of over 50%. Manhattan mirrored this trend, with its pipeline slashed in half, now totaling just 1.5 million square feet.
This retrenchment signals growing caution among developers in the face of persistent high vacancy rates and shifting demand in the post-pandemic office landscape. Boston posted the sharpest annual increase in vacancies in the region, rising by 440 basis points to reach a 17.1% vacancy rate. Meanwhile, Manhattan—while also facing headwinds—saw its vacancy rate decline slightly by 100 basis points to 16.5%, the lowest in the Northeast.
“Office development across the Northeast continued to decline in March, with significant pullbacks in some of the region’s most active markets,” notes the CommercialEdge report.
Investment Still Flowing Into Manhattan
Despite the construction slowdown, Manhattan remained a hotbed for office investment, leading the nation with a Q1 sales volume of $2 billion, equating to an average of $439 per square foot.
Philadelphia, in contrast, recorded the lowest average office sale price in the Northeast at $117 per square foot, a reflection of its more affordable market and potentially lower investor appetite.
Vacancy Rates Paint a Complex Picture
While Boston and Manhattan are struggling with vacancy concerns, other Northeast markets fared slightly better. New Jersey and Philadelphia posted vacancy rates of 19.0% and 19.7% respectively—both under the national average of 19.9%.
Still, the overall trend remains sobering for the office sector. The report underscores that as remote work continues to influence long-term leasing strategies, developers are increasingly hesitant to break ground on new projects without pre-leasing commitments.
For more detailed data and insights into the top 25 office markets nationwide, readers can access the full report here: CommercialEdge National Office Report. Historical office market trends and previous editions of the report are also available at CommercialEdge Office Reports.
