Current investor sentiment reflects a cautious outlook, as a widening bid-ask spread has slowed transaction velocity, the report said. “Highly amenitized CBD deals appear to generate less interest than in previous years, reflecting heavier construction volume in many downtowns

and slowing CBD rent growth.”

Heading into 2017, the report says that both the national average price per square foot and average cap rate are even with their 2007 benchmark, though vacancies have yet to reach previous lows. “Pricing disparities persist. While downtown prices are 59% above the downturn trough, suburban prices have risen 35%.”

Part 2 of 2

CALABASAS CA—In part one of this two-part coverage of Marcus & Millichap's latest US office investment report, we wrote that San Jose and Seattle-Tacoma took the top two spots of the national office property index while the top half comprises a geographically diverse group. Miami-Dade and Tampa-St. Petersburg are the highest-rated Florida markets, while positive supply-and-demand dynamics enabled Nashville, Atlanta and Charlotte to secure high rankings.

In part two of this article, we take a closer look at the report's notes on capital markets and the investment outlook. “Moderate economic expansion and muted inflation throughout the current cycle allowed the Federal Reserve to put off hiking its short-term lending benchmark, but its increase in December conveys a positive outlook for economic growth,” the report said. “The central bank anticipates raising the Fed Funds rate three times this year.”

The report also said that liquidity remains sound, but debt sources exercise discretion. “Lenders continue to target urban properties with secure tenancies. Properties in the suburbs may be subject to tighter scrutiny and more conservative loan underwriting, but assets with solid long-term tenant rosters and on-site amenities will likely be viewed favorably.”

Current investor sentiment reflects a cautious outlook, as a widening bid-ask spread has slowed transaction velocity, the report said. “Highly amenitized CBD deals appear to generate less interest than in previous years, reflecting heavier construction volume in many downtowns

and slowing CBD rent growth.”

Heading into 2017, the report says that both the national average price per square foot and average cap rate are even with their 2007 benchmark, though vacancies have yet to reach previous lows. “Pricing disparities persist. While downtown prices are 59% above the downturn trough, suburban prices have risen 35%.”