{"id":1004666603,"date":"2023-07-19T23:22:51","date_gmt":"2023-07-20T07:22:51","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004666603"},"modified":"2023-07-25T09:03:26","modified_gmt":"2023-07-25T17:03:26","slug":"where-does-office-investment-lie-in-2023","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/where-does-office-investment-lie-in-2023\/","title":{"rendered":"Where to Find Office Investment Opportunity Now"},"content":{"rendered":"
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Incomm Agent Solutions sold Biscayne Center, a 156,849-square-foot office asset in North Miami, Fla. Image courtesy of CBRE<\/em><\/p><\/div>\n

The growing pressure on the office sector is one of the key real estate trends of 2023. As CommercialEdge data shows, national investment volume dropped 73 percent year-over-year during the first quarter to just $5.7 billion. Yet amid the turmoil, experts note that some major markets are showing resilience, even in the face of fast-changing work models.<\/p>\n

According to CommercialEdge<\/em> data, office investment across the U.S. year-to-date through March totaled $5.7 billion. This accounted for a 72.7 percent decrease from the same time in 2022, when $21.1 billion in office assets was sold. While the office investment landscape is expected to shift further, some markets seem to be more resilient in the face of upcoming changes.<\/p>\n

“I would emphasize the submarkets and locations within each market and product type more than specific markets,” Anita Kramer, senior vice president of the Urban Land Institute’<\/strong>s Center for Real Estate Economics and Capital Markets, told Commercial Property Executive<\/em>. “There appears to be a bifurcation in the office sector, similar to what we’ve seen for decades in the retail sector, with newer buildings in well-connected, walkable locations getting the lion’s share of leasing\u2014and subsequently, investor attention.”<\/p>\n

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READ ALSO:<\/strong> ULI, PwC Pick These CRE Trends to Watch for in 2023<\/a><\/p>\n

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ULI and PwC<\/strong>\u2019s report on Emerging Trends in Real Estate 2023<\/a> suggests that certain office markets are likely to see strong investment performance in the coming years. Exhibit 3-12 presents the 20 markets that received the highest proportion of ‘buy’ recommendations for office investments compared to other options like \u2018hold\u2019 or \u2018sell.\u2019<\/p>\n

However, when comparing these percentages to similar exhibits for industrial and multifamily sectors, it becomes evident that the markets in those sectors have significantly stronger ‘buy’ recommendations. This highlights the uncertainty that surrounds the office market, although there are some relatively strong office markets when compared within the sector, Kramer explained.<\/p>\n

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Exhibit 3-12 from ULI & PwC’s Emerging Trends in Real Estate 2023 report. Image courtesy of ULI<\/em><\/p><\/div>\n

To determine future office investment opportunities in 2023 and beyond, we analyzed investment volume data from CommercialEdge year-to-date as of March, considered metrics and forecasts from the ULI and PwC report, and consulted local experts.<\/p>\n

1. Boston<\/h2>\n

As a market with a strong academic presence and a thriving health-care industry, Boston offers investors an opportunity to tap into a highly educated and skilled workforce. The PwC and ULI report names it as one of the nation\u2019s knowledge and innovation centers and an ongoing world leader in life sciences.<\/p>\n

According to a recent CBRE U.S. Life Sciences outlook<\/a>, the life sciences industry\u2014which experienced remarkable growth during the health crisis\u2014has returned to a more typical rate of expansion in 2023. However, the demand for laboratory and research and development space continues to outperform pre-pandemic levels.<\/p>\n

While the volume of investment sales in the sector has decreased to pre-COVID-19 levels, prices remain high and capitalization rates are at record lows due to strong investor confidence, positioning Boston as the first-ranked market for office investment on our list.<\/p>\n

Office transaction volume during the first quarter of 2023 amounted to $680 million, CommercialEdge data shows. While this represents a steep decline from the $2.3 billion recorded in the first quarter of 2022, the market encompassed 10.5 percent of the nation\u2019s total office sales volume at the end of March. Moreover, the average sale price for an office asset was $555 per square foot at the end of the first quarter, well-above the national rate of $195 per square foot.<\/p>\n

Investment activity was concentrated in the Route 128 Central submarket, where TPG Real Estate<\/strong> sold CenterPoint, a 578,130-square-foot life sciences campus in Waltham, Mass. The property was acquired by Capital Management<\/strong> for $578 million, commanding nearly $1,000 per square foot.<\/p>\n

2. Miami<\/h2>\n

Miami has experienced consistent economic growth over the years, driven by sectors such as finance and international trade. The market has diversified its economy beyond its traditional reliance on tourism, becoming a regional hub for a diverse range of industries, and providing investors with a range of opportunities to capitalize on its growing commercial real estate market.<\/p>\n