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The US property market picks up, but not without concerns

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The US economy is ready to shrug off the last effects of the recession, which lead to jagged GDP growth in the past five years.

According to Colliers International, the US office property market in particular is showing signs of a healthy recovery. Last year alone more than 3 million jobs were added to the economy, a record high since 1999.

With the number of jobs continuing to grow in every sector, the market is abuzz with hiring activity. This has lead to an ideal outcome in terms of the demand and supply of office spaces. The number of premises being leased is on the rise, also in tow are the average rents indicating an upward trend.

Local and foreign investors are considering development feasibility outside of traditional property hot spots like New York and San Francisco.

There is one area of concern though, developers are not venturing beyond the usually profitable hubs. Nearly two thirds of the recent construction of office space is concentrated in 10 markets with stable tech tenant demand. Houston, which is being touted the fastest growing metropolis in the United States, accounts for 18 per cent of the country's construction activity. However, the sharp decline in oil prices could render it particularly vulnerable. 

While centres like Houston, San Jose and Seattle are bustling with construction projects, developers are steering clear of Orange County, Miami and Las Vegas. 

On the other hand, due to the nature of tenant demand, certain cities are experiencing activity that is limited to certain pockets of the city. For example, West Los Angeles and Tempe are being favoured by builders while the rest of the city remains relatively quiet.

The bottom line is that despite the economy picking up, developers and lenders do not want to take the risk of overbuilding just yet.

Date Published: 27 Mar 2015
Category: General News

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