Construction has posted double-digit annual gains for the past 30 months, says Cassidy Turley.

WASHINGTON, DC—Construction cranes all but disappeared from the landscape during the depths of the downturn. In the summer of 2014, they’re seemingly everywhere to be found, in a positive response to an economic recovery that’s gradually gaining strength. Yet is this ramping up a prelude to overbuilding, as it has been in more than one previous cycle?

At present, the fundamentals generally support the ongoing construction activity, with the possible exception of one sector. That’s among the key takeaways of a new Cassidy Turley report on the state of commercial real estate development across the US.

The report notes that while the current recovery is the slowest on record in the post-World War II era, there’s an upside to this gradual pace. “The fact that there has been no major rebound in growth — no snapback, no surge — lowers the probability that the US economy faces the imminent threat of overheating, often the cause of the next recession.”

Further, even with double-digit year-over-year increases in construction spending seen for the past two-and-a-half years, employment in the sector has recovered just 25% of the 2.2 million jobs it lost during the downturn, putting the construction business in “the early stages of recovery,” according to Cassidy Turley’s report. “Moreover, with construction payrolls just 25% recovered, even as the rest of US GDP is achieving new highs, it would seem there is a disconnect between what is currently being demanded by the economy in terms of space and what is currently being supplied.”

Office-using employment has been among the slowest-paced jobs sectors in terms of recovery, and that, coupled with many tenants’ shift to smaller and more efficient spaces, has kept absorption down. Yet there’s an impetus for development here: aging stock, approaching 80% of the inventory in markets such as New York City and Chicago.

“This would not be an issue if tenants desired older space,” the report states. “But for the most part, they do not. Since 2010, high-quality office space has accounted for 70.8% of all the net absorption that has occurred during this recovery.”

In connection with a NAIOP Research Foundation report on the state of industrial development, NAIOP president Thomas J. Bisacquino told earlier this week that the wave of construction in the sector isn’t likely to put a dent in absorption. Cassidy Turley’s assessment bears him out.

Even as industrial vacancy has fallen nationally to 8%, “go one layer deeper and one can easily observe that certain aspects of the industrial market are much tighter than that,” says the Cassidy Turley report. “Over 60% of the country’s industrial markets have less industrial space than their 10-year average.” Meanwhile, asking rents are rising “as fast today as they did during the last real estate boom.”

For multifamily, the “explosive growth” in construction will exact something of a toll in terms of vacancy increases and rent growth. Even so, vacancies will remain “much tighter” than the long-term average of 5.4%, and while rent growth may moderate, it will still come in “somewhere between 2% and 3%” annually.

As with office, there’s a similar “flight to new” dynamic at work in retail, with tenants demanding class A space. That has boosted new construction from 19.3 million squared feet between 2009 and 2012 to 17.1 million square feet in 2013 alone. In contrast to industrial, there’s little speculative retail development going on, and Cassidy Turley notes that 88% of the space that has come on line over the past 12 months had tenancy in place before construction was finished.

Unlike the other sectors, however, “the retail sector may be a short-lived chapter in this tale,” according to Cassidy Turley. It predicts a slowdown in construction after a wave of new product is delivered—amid increasing challenges for brick-and-mortar retailers.