Premium Tenants Drive Select US Office Tower Revival

Flight to Quality Shapes Office Pipeline

According to CoStar, US office skyscraper construction is returning, but only for projects with major anchor tenants. Premium, well-located office space remains scarce in New York, Miami, Chicago, and Washington, D.C. This shortage is fueling a modest development restart despite high vacancies and difficult financing conditions.

Developers increasingly need sizable precommitted leases before breaking ground. This marks a major shift from pre-pandemic cycles, when speculative towers were more common. The trend also highlights a widening office divide. Trophy assets attract capital and tenants, while older buildings struggle with weak demand and rising vacancies.

The Details

Recent projects demonstrate this shift. In Chicago, Sidley Austin will anchor a 45-story tower in Fulton Market. Its commitment supports the city’s first new ground-up office skyscraper in more than six years. American Express is advancing a roughly 2M SF tower at 2 World Trade Center in New York.

Meanwhile, Citadel and Santander are supporting major new developments in Miami. The market has already shown the consequences when developers cannot secure enough preleasing. Miami’s One Brickell City Centre was scrapped amid insufficient tenant commitments. These anchors help developers meet preleasing requirements and secure construction financing. Some lenders reportedly require developers to prelease at least 50% of a building. Top-market rents are also climbing sharply. Sidley Austin could pay over $115 PSF, versus previous market-leading rents near $70 PSF.

Preleasing and Scarcity Drive Rents Higher

Preleased trophy projects sharply contrast with slower development across the broader office market. Nationally, developers delivered only 30M SF over the past year. That total represents less than half the long-term annual average. Meanwhile, about 49M SF remains in the US office development pipeline.

Speculative construction remains limited as developers prioritize markets with strong demand for premium space. Large tenants can still negotiate favorable terms by committing before construction begins. However, limited availability increasingly strengthens landlords’ pricing power. New towers can command rents above $100 PSF in core submarkets. Older buildings often compete through discounts while struggling to retain tenants.

Why It Matters

Developers now need creditworthy anchor tenants to secure financing and move projects forward. These tenants must accept record rents and long-term commitments. According to CoStar, lenders maintain strict standards, allowing only select projects to advance across major gateway cities.

This divide carries major implications for brokers and investors. Trophy towers capture disproportionate capital and leasing activity. Meanwhile, lower-rated properties face growing obsolescence risks and declining valuations. Sidley Austin’s expected rent above $115 PSF illustrates this widening gap. Modern buildings with strong amenities continue gaining value, while aging inventory faces mounting pressure.

What’s Next

Market watchers expect this divide to persist while financing remains tight and tenant preferences favor premium buildings. New construction will likely remain limited without significantly lower interest rates or stronger office employment growth. Developers will continue focusing on preleased projects in prime locations.

Speculative office development is unlikely to rebound soon. Aging buildings will require substantial renovation investments to compete effectively. Otherwise, owners risk prolonged vacancies and weaker valuations. Major cities will see new projects where creditworthy tenants can support development economics and financing requirements.