“In the really hot markets, developers have been able to break ground without pre-leasing requirements, and that's something a little bit different,” she says. Of the 105 million square feet in the pipeline, 78 million square feet are for speculative developments. These projects, however, tend to occupy the best locations in the top cities, with great transit options and very strong demand drivers. And tenants are definitely showing up and signing deals. About 35% of that upcoming spec space has now been pre-leased, and combined with the build-to-suit projects, 50.1% of the total space underway has been pre-leased.

Still, all of that new space should soon transform by 2018 what has been a market quite favourable to landlords into a more tenant-friendly one. “Markets are going to have to work to absorb all of this space,” Georgules says, especially metro areas like New York, Dallas, and Washington, DC, which account for roughly 30% of the existing development pipeline.

CHICAGO—The US office market continues to expand at a steady clip, and although no seismic shifts are expected, growth could finally begin to moderate next year as employers slow down hiring, according to JLL researchers. The Chicago-based firm just released its third quarter office statistics, and found that more than 47% of all leases that exceeded 20,000 square feet were expansions, findings quite similar to what has been seen for several years. Nearly 42% of the leases did not change in size, and just 11% involved downsizing.

“Expansion activity continues to be the dominant driver, and it's stable,” Julia Georgules, vice president, JLL Research, tells GlobeSt.com. “There has been no dramatic shift.” In fact, since January, the US office market has continued to record improved fundamentals and lingering uncertainty from 2015 has lessened as companies continue to grow and return to urban cores.

But by 2017, she does expect that the rate of expansion will begin to slow, and more tenants will decide to stick with the same amounts of space. “We have such low unemployment; it's going to be hard for companies to continue to grow their headcounts.”

In the third quarter, the US vacancy rate fell to 14.5 %, a drop of 10 bps. Georgules considers this impressive because developers have delivered new space at a robust pace throughout the year. Tenants absorbed 12.8 million square feet in the third quarter, staying just ahead of the 12.7 million square feet of new deliveries. Developers have completed 35.4 million square feet of new space since the start of the year, and the development pipeline now stands at more than 105 million square feet, the most since 2007, when 108 million square feet was underway.

“In the really hot markets, developers have been able to break ground without pre-leasing requirements, and that's something a little bit different,” she says. Of the 105 million square feet in the pipeline, 78 million square feet are for speculative developments. These projects, however, tend to occupy the best locations in the top cities, with great transit options and very strong demand drivers. And tenants are definitely showing up and signing deals. About 35% of that upcoming spec space has now been pre-leased, and combined with the build-to-suit projects, 50.1% of the total space underway has been pre-leased.

Still, all of that new space should soon transform by 2018 what has been a market quite favourable to landlords into a more tenant-friendly one. “Markets are going to have to work to absorb all of this space,” Georgules says, especially metro areas like New York, Dallas, and Washington, DC, which account for roughly 30% of the existing development pipeline.