The office construction market will likely lag the economy as a whole as we move into a recovery cycle, but it's worth noting that office vacancies rates are declining as we head into the new year. The number for Q4 2011 was 17.6 percent which we last saw in Q2 2009, and represents a 0.9 percentage point year on year decline. That's still a high rate, so I wouldn't be looking to invest my money in new office construction just yet, but there is some important heterogeneity in the marketplace with CBD vacancies at 14.2 percent and suburban offices at 19.6 percent. There's partial substitutability between CBD space and suburban space, so when the CBD market gets tight we may just see demand spill over into the suburbs rather than spark new construction.
On the other hand, in the specific New York City market (the largest in the country) the vacancy rate is already down to 7.4 percent so regulatory barriers to construction may be a bigger impediment than demand-linked ones.