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Commercial Office Market Shouldn’t Suffer from Housing Market’s Woes


WAYLAND, MA –The housing bubble that led to the Great Recession and is still holding the economy back has no parallel in the commercial office market, according to a recent report in The Zweig Letter.

The main reason, according to Kermit Baker, American Institute of Architects’ chief economist, is that the non-residential market in general didn't fall victim to the speculative overbuilding that led to the housing bubble.

While demand for office property is scant now—leading to high vacancy rates and falling rents—as the economy recovers and employment picks up, that market will likely bounce back quickly.

"I think we'll have a fairly healthy rebound," says Baker. "By the end of the year we could see some reversal in construction starts."

For architecture and engineering firms working in the office market, the lack of demand has meant mostly "paint and carpet jobs," as renters stay put and landlords try to retain them. Moreover, firms have started looking beyond their comfort zones to secure backlog.

"We started to pursue work outside our traditional market area five or six years ago," says Guy Geier, a senior partner with FXFOWLE Architects in New York. "The firm had basically been known in the New York market and not much beyond that. We felt we couldn't limit ourselves geographically."

This branching out includes an involvement in international projects. "We're doing and pursuing work overseas pretty aggressively," adds Geier, listing projects in Saudi Arabia, Abu Dhabi, India, and China.

Gary Kirkbride, senior vice president with the infrastructure engineering services practice at Dewberry in Fairfax, VA, told The Zweig Letter that the office market is still dormant, with demand for upfront site services such as feasibility studies, planning, rezoning, and building permits remaining weak. "We're certainly not seeing anybody going out and starting speculative building," says Kirkbride.

About ZweigWhite
ZweigWhite is one of the nation's leading sources of business management services for architecture, engineering, and environmental consulting firms. The ZweigWhite team consists of experts in strategic business planning, business valuation, ownership transition, human resources management, finance and administration, mergers and acquisitions, market research, marketing, project management and project delivery methods who collectively produce a comprehensive suite of products and services, including newsletters, industry reports, executive training, business conferences, and advisory services covering virtually every aspect of firm management. The firm is headquartered in Wayland, MA, with additional offices in Chicago and Washington, D.C.

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