Smile State Office Markets Outpace Big 6

Carpenter says the trends favoring Sunbelt markets are poised to continue through 2019.

NEW YORK CITY—Evidently it’s not only lower prices, and therefore higher yields, that draw investors to office properties outside the six gateway markets. It’s also comparatively strong fundamentals.

Research from Cushman & Wakefield Capital Markets shows that secondary office markets, mainly in the Sunbelt, are outperforming when it comes to rent growth and net absorption. On a year-over year-basis through June 30, for example, rent growth in secondary Sunbelt markets has been 4.5%, compared to an average of 3.2% for the likes of San Francisco or Manhattan. Leading the way are Nashville (9.9% Y-O-Y), Austin (8.7%), Baltimore (8.3%), Miami (6.5%) and Phoenix (5.8%).