Construction data was released today, and once again I don't get this:
Following the pandemic, everyone was supposedly working from home. Downtowns were hollowed out. Vacancy rates were 50%.
And yet, construction of office buildings has never fallen below its pre-pandemic peak. We're putting up new office buildings like gangbusters. What's going on?
Made me think of those "cities" China built that didn't get occupied.
I can tell you one thing that ISN'T going on: altruism.
Are data centers included in office buildings?
not a bad theory.
" Big tech on track to pour more than $180B into data centers this year
Amazon, Google and Microsoft accounted for more than three-quarters of infrastructure capital expenditures in Q3 2024, according to Dell’Oro Group."
of course a lot of that is not building costs, but the tech infrastructure, but 5-10% maybe is.
Yes. As far back as 1974 when I got my first job at DEC (Digital Equipment Corporation in 1974. I was one of their first database administrator, and wound up doing a LOT of consulting work for DEC customers in big, medium, and small offices data centers even then. One of our smaller customers "data center" was installed in a bathroom over in the corner of the office floor. The service tech had to stand on the toilet seat to work on the computer.
Later I was working for EMC Corporation, a major manufacturer of titanic (for the time) disk arrays. I got sent west as head of the EMC engineering liaison group to Microsoft to get our arrays certified with Windows, since I found out (looking over the shoulder of a couple of our support guys in Maynard, MA) that they were getting some "odd" looking disks showing up on our arrays. They showed me the boot block data (first 512 bytes on the (virtual) disk, the only thing our remote monitoring software was allowed to access of actual data on the virtual disks that could be created in our arrays. (We didn't care about the customer data - just that first block.) As a Windows expert, I immediately said - that's a Windows and Unix/Linux style boot block, then squinted more closely, and said - definitely Windows (there was a small field that was unique to te actual OS). So I wound up contacting Microsoft and informing them that we had a lot of Windows NT PCs attached to a lot of EMC arrays and nobody had asked us if it was supported.
In 1998 we acquired space in a new office park in northern Bellevue (WA), just south of the Microsoft main campus complex in Redmond.
We planned what we thought was a modest computer lab that took up one floor of one building on a sizeable campus. We told them our power requirements and the office park management freaked out, big time! Our lab would be using every bit of the power they had planned for the entire park. They said that we would not be allowed to do heavy manufacturing production - and we said, basically: "Welcome to your new hell. You planned for tech based on IBM Selectrics. You are a good 20 years out of date."
It turned out that everybody else moving to the park wanted small, medium, and, in some cases, even bigger labs than ours. They upped the rent and service fees quite a bit after that - which our EMC facilities folk had warned us about being - "ridiculously cheap even with a lot of hydro-electric power in WA".
And, lo, it was so...
it's gotten to the point that amazon, google, microsoft etc are planning to use small modular nuclear reactors built on-site to power the next generation of data centers. we'll see if it comes to pass, they're still facing tech, cost and regulatory issues but it's pretty wild.
Wow! Thanks for the trip back in time. I do miss those days. I was in a number of all-DEC shops for several years, as admin and coder.
Re the office building frenzy: wasn't there something like that in Texas in the 1980s? Over built, never occupied, investors took a serious "haircut." Even worse than the Fracking Frenzy.
Would be much more efficient (lean) to build data centers underground, and for security reasons in more distributed allotments, none needing to be too large, except some nodes here and there for specific purposes relating to physical proximity (a very tiny fraction).
Where people actually work, especially most white collar office workers, a completely different concern, design and architecture.
Idiocy.
Maybe they can eventually house the homeless.
Didn’t Kevin also say like just a few months ago that work from home isn’t as productive as in an office? If that’s true, then of course we need to return to building more office space as the population grows.
(Of course it isn’t actually true for many office workers, who actually managed to do more from home without their idiot coworkers interrupting them or their idiot bosses forcing them to attend pointless meetings. Not to mention the workers who would actually happily be on call at all hours of the night/weekends and/or take a pay cut in exchange for being able to work from home permanently. Even Kevin himself enjoys the luxury of working from home on this blog. But Kevin told us that workers just aren’t productive at home and now is shocked that office buildings to warehouse workers are being built on that theory.)
I did a lot of work from home starting in 1975 at my first DEC job (see above). We had a very badly designed transaction processing monitor that was called (in SW Engineering parlance - "spaghetti code"). After 8-9 hours in Maynard, MA, I'd come home, help my wife with dinner, and then spend 2-3 additional hours mapping and redesigning the workflow for a new transaction processing monitor in properly structured code.
I was also the contact for the Engineering IT operations group - and had to respond to blowups because they didn't follow the instructions for proper backup and restore of Databases spanning files on multiple disks. It took a LONG time, some lost sleep, and a number of presentations to hammer into their heads how a large multi-disk database restore was VERY different from individual disk or file restores.
At one point in 1975, Engineering management said that everybody in engineering had to stay in the office an extra hour (till 6 PM). I ignored it since I was coming in well before 8 AM, headed out at 5PM, and after dinner and doing that work at night (and sometimes after midnight).
My manager said that her manager had noticed me heading out at 5pm and did not appreciate it - and I laid out my schedule and said that if her manager wanted to have a discussion, I could stay till 6PM, and not do f' all until I got to work at 8AM the next day - including answering calls from IT in the wee hours.
Which meant they'd lose 2-3 hours per work day, plus time I would put in on weekends when I got a programing hot idea.
Apparently her manager was not at all interested in challenging me on the topic.
Y'know, I sometimes think that's the hardest thing for people to understand: the need for multiple backups in multiple media in multiple places. _Especially_ for visual data, i.e., personal photos and videos. No, relying on Google Photos isn't good enough, even if that's what they imply.
Hybrid schedules are becoming the new it thing, at least for white collar workers, so no we don't need to start building a ton more office buildings, unless we're somehow building them differently for this new reality, leaving out that "AI" (LLM automation/plagiarism) is going to be pushed hard by corporations so they can pay a lot less white collar workers in the years and decades ahead.
You should see manufacturing: https://fred.stlouisfed.org/series/TLMFGCONS
Bubble.
+10. And another 5 for conciseness.
There is a need to replace a lot of aging office buildings that aren't set up for the way modern businesses operate. Wiring is inadequate, etc... So, there's still plenty of demand for updated space. What is to become of the older buildings is an ongoing discussion. Like malls, they've outlived their usefulness in their current form.
There's some discussion around turning them into temporary housing, but it takes a lot of work since bathrooms are communal and lack showers.
Yes, much of this a replacement for the last surge of construction going out of use.
I was reading a while back how the Chrysler building in NYC is in really bad shape and in need of major upgrades because its interior spaces are just completely inadequate for today's office space needs (ventilation, accessbility, etc.). But nobody seems to want to invest in what it takes to do that work, even in such an iconic property. Much cheapter/easier just to build something new.
New building space added is a more relevant stat than dollars spent.
Office construction typically run 3-4 years from beginning to end.
Office space removals/demolitions are also an important missing piece.
Inflation adjusted dollars doesn't give us enough info to tell a story about what is going regarding the demand for and supply of physical office space for workers.
So it has stayed at $120 billion since 2020? ... It was growing semi-steadily from 2015 through 2020, then dropped $15 billion, and has been flat ever since. So I would certainly say that something has changed.
I suspect construction cost inflation is way ahead of general inflation. I would say most building materials, for example, have doubled since 2019 (or more). Labor? Well crackdowns on illegals have cut into the casual labor supply. Skilled labor there is a generational problem as the older workers retire & no one has trained enough replacements.
That's my guess. That actually this stable office construction budget is actually measuring less activity (in terms of output) because of the use of a general inflation index?
It's probably not a huge part of this, but I find the abandoning of various suburban corporate centers from around the 1970s -90s an interesting phenomenon. Numerous huge no doubt very expensive award winning innovative distinctive kinds of campuses have been abandoned and leveled.
Where did the corporate centers go, and are all the employees who bought houses in the area for a short drive to work now getting on some kind of transit to return to the downtown the corporation had left but where the work now is again in new very expensive downtown highrises? Of course in some cases the corporation itself went away or otherwise changed.
How long will Apple's very expensive stupid giant donut suburban building last before that one is declared a white elephant and they move to some shiny new downtown highrise?
Too much money available and no productive places for it to go.
A sure sign of excessive economic inequality.
Tax the rich until there are no billionaires, and raise wages.
+25.
Even so. And that's the message we should be getting out to people, namely that we don't want to raise taxes on billionaires because they're not paying their 'fair share', we're saying we want to raise taxes on billionaires so they don't have the outsized power to screw the rest of us over. Which they do, once they get it. Every single goddamn time.