GlobeSt.com: What do these top office-buying markets have in common?

Muoio: The single biggest commonality among the top-five office markets is a strong local economy. Robust job growth is driving office take-up. In addition, these markets do not have overly aggressive development pipelines, although there are differences in degree of supply across these five.

GlobeSt.com: What can other markets can learn from these top office-buying markets?

Muoio: The most important thing by far is jobs. The office markets that are languishing are just not generating enough office job growth to make any meaningful dent in office vacancies. This cycle has really been one of haves and have-nots in the office segment, where some markets have seen healthy demand for office space as a result of strong local economic growth, and others have not been able to generate demand. At this point in the cycle, the differentiating factor among strong demand markets is what the intensity of new office development is.

GlobeSt.com: How can investors in these top markets be strategic since pricing tends to be high?

Muoio: Needless to say, submarkets can vary widely within any market, not only in where the demand is being generated, but also in where developers are focused. Key focal points for investors today include transport connectivity, walkability and mixed-use-type areas (live/work/play).

GlobeSt.com: What else should our readers take away from this report?

Muoio: I think a key point is that while the US macro statistics paint a picture of tepid office-market recovery, with modest demand and modest supply, there are significant differences across markets. Demand varies widely and increasingly, and so does the supply pipeline, so it really does take a more granular focus for successful investing in the office market.

The other is that the “laggard” markets continue to lag, but now many of the previously hottest office markets are now beginning to sustain high levels of completions, cooling their outlook. So, there are fewer Goldilocks “just-right” office markets today.

IRVINE, CA—A strong local economy and jobs have led to markets like Orange County to be the best for office investors, but demand and the supply pipeline vary widely among submarkets, Ten-X's chief economist Peter Muoio tells GlobeSt.com. According to the firm's latest US Office Market Outlook, the sector's fundamentals appear to be stalling after years of slow recovery, since vacancy rates have plateaued despite a healthy labor market and growing national economy.

As we recently reported, the forecast indicates Portland, OR; Oakland, CA; Palm Beach, FL; Orange County, CA; and Miami are the top markets in which investors should consider buying office assets. These regions, concentrated in Florida and the West Coast, are being fueled by growing economies, where strong demographics and consistent job growth are fueling robust demand for office space.

Houston, Cleveland, Suburban Maryland, Memphis and Milwaukee are the top markets where Ten-X Research projects market conditions might cause office investors to consider selling their properties. These cities are being undermined by weakening labor markets, which have reduced demand for office space and significantly slowed absorption rates.

We spoke with Muoio about commonalities among the top office-buying markets and what other markets can learn from their success.

GlobeSt.com: What do these top office-buying markets have in common?

Muoio: The single biggest commonality among the top-five office markets is a strong local economy. Robust job growth is driving office take-up. In addition, these markets do not have overly aggressive development pipelines, although there are differences in degree of supply across these five.

GlobeSt.com: What can other markets can learn from these top office-buying markets?

Muoio: The most important thing by far is jobs. The office markets that are languishing are just not generating enough office job growth to make any meaningful dent in office vacancies. This cycle has really been one of haves and have-nots in the office segment, where some markets have seen healthy demand for office space as a result of strong local economic growth, and others have not been able to generate demand. At this point in the cycle, the differentiating factor among strong demand markets is what the intensity of new office development is.

GlobeSt.com: How can investors in these top markets be strategic since pricing tends to be high?

Muoio: Needless to say, submarkets can vary widely within any market, not only in where the demand is being generated, but also in where developers are focused. Key focal points for investors today include transport connectivity, walkability and mixed-use-type areas (live/work/play).

GlobeSt.com: What else should our readers take away from this report?

Muoio: I think a key point is that while the US macro statistics paint a picture of tepid office-market recovery, with modest demand and modest supply, there are significant differences across markets. Demand varies widely and increasingly, and so does the supply pipeline, so it really does take a more granular focus for successful investing in the office market.

The other is that the “laggard” markets continue to lag, but now many of the previously hottest office markets are now beginning to sustain high levels of completions, cooling their outlook. So, there are fewer Goldilocks “just-right” office markets today.