The office sector’s performance has been a mixed bag over the past few years, with some segments of the market vastly outperforming others. The half year investment sales figures from research firm Real Capital Analytics, however, show that the sector’s dynamics may be beginning to change. Here are some trends that emerged in the first and second quarters:
- Sales of suburban office properties outpaced those of office buildings in Central Business Districts (CBDs), with year-over-year sales volume growth of 50 percent. In contrast, sales volume on CBD properties grew by just 20 percent in the first half of 2015. In addition, cap rates on sales of suburban office buildings declined at the same rate as cap rates on CBD buildings in the second quarter, by 30 basis points, to 7.0 percent. The overall national average is currently 6.8 percent.
- Portfolio deals accounted for 30 percent of office sales volume in the first half of the year.
- Manhattan, Chicago and San Jose, Calif. experienced the greatest total sales volumes in the first half of the year, but Raleigh/Durham, N.C. and St. Louis experienced the greatest increases in sales volumes compared to last year, at more than 400 percent each. Indianapolis was not far behind, with sales growth of 368 percent. Meanwhile, the office market in the state of Hawaii saw sales volumes jump 713 percent compared to the first half of 2014.
- Hudson Pacific Properties, Farallon Capital Partners and Blackstone were the most active office property buyers by volume, while Ventas, Starwood Capital Group and Vanderbilt Capital Advisors bought the greatest number of buildings.
- All in all, sales of office buildings continued on an upward trajectory in the first half of 2015, reaching $71.4 billion—an increase of 36 percent compared to the same period in 2014.