How Office Development’s Returning to the Top Tier

Article originally posted on HERE on December 22, 2025

Office remains one of the least favored asset classes on many investors’ lists due to the overhang of space nationally and a cloudy long-term outlook for the product type. But a handful of recent development projects are proving there’s a robust market for deluxe tailor-made office space, and a few markets even justify breaking ground on Class A+ space without a tenant.

Based on our research, there are 12 large office development projects—400,000 square feet or more—recently completed, under construction or planned in cities from New York to San Francisco. While five of these projects are tenant-driven, seven are developer-driven or spec. All seek to capture tenants’ willingness to pay up for the best office space possible.

“Amenities have been key in attracting workers back into offices,” said Markus Shayeb, senior vice president & San Francisco managing director at TRI Commercial Real Estate Services/CORFAC International, noting large amounts of funds are being invested in tenant lounges and amenities and infrastructure, like increased power capacity. “Such expenditures are often not justified for older buildings as most do not have the size or rental incomes to justify the cost.”

While construction costs have risen more than 50 percent over the last five years, slower construction activity is beginning to generate labor-cost adjustments, and the comeback of major banks to real estate funding is also helping to drive new office development, Shayeb suggested.

What’s being built and why

The projects that are underway or recently completed do not portend any kind of development boom. According to Yardi Matrix’ November office report, the national under development pipeline comprised 33.4 million square feet in October, representing 0.5 percent of existing stock and 1.7 percent when adding projects in planning or proposal stages. Office construction starts through October were 12.9 million square feet—on par with with last year. But this collection of high-end properties decked out with all the latest amenities are noteworthy and a positive sign for the office market.

Five recent skyline additions have been tenant-driven: the 800,000-square-foot Mutual of Omaha Headquarters Tower in Omaha, an 800,000-square-foot Goldman Sachs Campus in Dallas, a 1.1 million-square-foot office project at New York City’s 70 Hudson Yards that will serve as Deloitte’s new North American headquarters and the 2.5 million-square-foot 270 Park Avenue, JPMorgan Chase’s new global headquarters and Manhattan’s first all-electric, net zero building.

And Detroit got its first new office building since the 1980s thanks to GM, which is locating its new headquarters to a new 12-story office building being developed by Bedrock. The office building anchors twin towers, which upon completion with be the tallest building in the city and include residential, hotel, office, retail, dining and event spaces.

But, by our count, seven developer-driven office buildings are also underway in Manhattan, Austin and San Francisco. All of these markets are still struggling with an overall excess of office space. Austin and San Francisco have some of the highest vacancies in the country. But there is a shortage of the state-of-art office space large employers require. Some developers are banking on that shortage and putting shovels in the ground. Here’s a closer look at those projects.

BXP’s 343 Madison Ave. in NYC

Manhattan’s overall office vacancy is 13 percent, down 370 basis points from a year ago, according to Yardi Matrix, and much of the recovery has been in Midtown Manhattan, where rents are averaging $200 per square foot. The flight to quality and an “in-office presence that’s organic to the city” has re-awakened the submarket post-COVID, said Nick Farmakis, vice chair in the New York office of Savills.

“Over the last year, vacancy has dropped to 15 percent and rents in Midtown (on average $200 per square foot) have evolved to a point where it would seem pretty obvious to go ahead and build on spec,” Fermakis said.

Yardi Matrix’ November Office Market report cited Manhattan as a bright spot for in-office work among 25 metros surveyed, with just 11.8 percent of office employees working remotely 100 percent of the time.

That momentum led BXP to announce it was moving ahead on the development of 343 Madison Ave. in Manhattan without any pre-leasing. The $2 billion, 46-story tower with direct access to Grand Central will deliver 930,000 square feet of office space.

BXP broke ground on the entrance to Grand Central and that has been completed. The company plans to break ground on the office tower in early 2026.

“With the demand in that the market specifically circling around that building, obviously the landlord is comfortable enough to start the development process,” Farmakis noted.

Once the project begins pre-leasing, BXP is expected to seek construction financing. C. V. Starr & Co., an insurance and investment firm, is expected to sign a deal for 300,000 square feet to become the project’s anchor tenant, Fermakis said.

The environmentally friendly project, with zero on-site combustion, a high-efficiency, direct outside air system, climate resiliency, decarbonization and health and wellness features, offers hospitality-style amenities and direct access to Grand Central Station.

Related California’s 530 Sansome in San Francisco

In San Francisco, where the vacancy rate was 26.1 percent at the end of November, according to Yardi Matrix, The Jackson Square Tower project at 530 Sansome St. is breaking through.

“We don’t see many office spec developments in San Francisco; however, the vacancy decline in Class A projects is generating some interest,” noted Shayeb.

Developed by Related California, Jackson Square Tower is the first, large-scale developer-driven office project in years. The developer got help from the City of San Francisco in expediting project entitlements in exchange for the promise to build a new, four-story fire station on Battery Street and provide $15 million in funding for affordable housing.

The 41-story, mixed-use tower featuring nearly 400,000 square feet of office space, a 200-key, five-star hotel and retail space is a public-private project that utilizes an innovative financing mechanism to offset the construction costs of the new fire station. The fire station is being financed based on a percentage of actual revenue collected from new hotel taxes without any upfront investment of capital by the city.

Expected to break ground next year, the project is being developed in partnership with Prime Finance. It’s expected to generate more than $800 million in annual economic activity.

Projects like this will continue to gain in popularity because the general public has become comfortable with the values offered in a mixed-use, city-like environment, according to David McCullough, principal of McCullough Landscape Architecture.

“Authenticity, community, connection, the ability to work, live and recreate without the need for a car are attributes that we have all become familiar and comfortable with,” McCullough said.

Lincoln Properties’ Waterline and more in Austin

Austin’s office market has not yet recovered from a building boom over the last decade that increased vacancy to nearly 27 percent, according to Yardi Matrix. But that hasn’t seemed to hinder new office construction. Five huge office projects have recently been completed, are under construction or planned.

“Austin continues to be a growing market that benefits from the business-friendly policies of Texas,” said Chris Gerlach, principal of CSA Realty Group/CORFAC International.

Office attendance in Austin is steadily improving and has outpaced much of the country, Gerlach added. Kastle Systems’ Occupancy Barometer has put Austin at the top of the list (above 85 percent) for office attendance measured against pre-Covid rates.

“Perhaps more importantly, there is a sizable and growing split between Class A and Class B office properties,” Gerlach continued. Class A office buildings in downtown are achieving steady and growing lease rates and positive absorption, while Class B properties are struggling with low occupancy and forced to reduce rates.

According to a recent Cushman & Wakefield report, downtown Austin Class A office space is achieving about $66 per square feet, while Class A space in other submarkets averages $51 per square feet

Currently, there are two new developer-driven projects by Lincoln Property in downtown Austin, The Republic, which opened in October 2025, and Waterline, which is scheduled for completion early next year.

The Republic, a 48-story, 816,560-square-foot project, “reflects the evolution of today’s office worker and is easily the nicest building in Austin,” said Gerlach.

The building provides direct access to Republic Square Park, a downtown event space, and features a ride-share dropoff, bike storage, a 12,000-square-foot lounge/dining/event space, 5,000 square feet of conference, a 6,200-square-foot fitness center, 120 EV chargers, a 25,500-square-foot outdoor terrace and 16,600 square feet of ground-level retail.

In planning projects, developers often invest in entitlements and produce marketing materials to make sure prospects are aware a site can be developed for office, but construction starts depend on a prelease being secured, noted Will Douglas, senior managing director in JLL’s Austin office.

Waterline, however, is Austin’s most recent spec building, he said, noting that it was justified financially by the hotel and residential components,.

While developments nearing completion provide increased incentives, such as abated rent and increased tenant allowances, developers are engineering deals with a focus on keeping the base rate as high as possible, which impacts value, Douglas continued.

Upon completion, this $520 million, 1.5 million-square-foot, 74-story mixed-use project will be tallest building in Texas at 1,022 feet high, offering sweeping views of Waller Creek, Lady Bird Lake and downtown Austin.

It includes 703,000 square feet of Class AA office space, 352 luxury residential units, 24,000 square feet of retail and a 251-key 1 Hotel, as well as an array of indoor and outdoor amenities.

While the company hasn’t announced any preleasing yet, 1 Hotel plans to open next summer with three restaurants, and Lincoln is currently in negotiations with other potential retail tenants, according to Lincoln Vice President J.R. Gideon.

Two new office buildings by Austin-based Brandywine Realty Trust, which would deliver roughly 1.3 million square feet of space, are also planned at ATX Uptown Austin, in a 66-acre, mixed-use neighborhood considered Austin’s second downtown. The $3 billion construction cost of Skyrise One & Skyrise Two will require rates of +/-$60 per square foot NNN, which outside of the downtown market Austin has never seen before, said Douglas. But the development of these projects is likely to move slowly until existing office vacancy at ATX is absorbed.

A 37.6-acre, mixed-use project in the heart of Southwest Austin, however, is currently underway. This innovative mixed-used development is replacing a defunct shopping center with 1.26 million square feet of office space, 1,700 residential units, retail shops, a supermarket, restaurants and potentially a hotel. This project will offer dynamic views of downtown and the Hill Country and redefine the landscape in one of Austin’s busiest commuter areas. It includes an abundance of park spaces, with direct entry to the Barton Springs Greenbelt.

For the near future, even as office dynamics improve, development is likely to remain sporadic due to high interest rates, rising construction costs fueled by tariffs, immigration reform and labor shortages.

These challenges, Gerlach said, are putting upward pressure on rental rates to a point where developers may have to re-think/redesign projects, because “there is only so much you can push rates.”