Suburban Offices Now Outpricing Urban Locations

Suburban office growth accelerated to a 3.6% annual pace in March, while urban assets declined by 2.4% year-over-year, reflecting a continuing trend of suburban outperformance in the sector.  

A new analysis from Real Capital Analytics shows that investor interest across all CRE asset classes is increasing, and prices across most sectors are going up. Suburban assets in particular are piquing the most interest; in February, prices increased 2.2% year-over-year.

High-end office assets in well-established markets continue to attract the eye of savvy investors: the market posted $10.5 billion in total quarterly sales, according to CommercialEdge data. Top sales in Q1 included The Exchange on 16th in San Francisco ($1 billion); 410 10th Ave. in Manhattan ($733 million); and The Crescent in Dallas ($700 million), which accounted for nearly 25% of the total $10.5 billion in sales over the quarter.

Overall CRE activity increased in March, with deal volume going up across most sectors, RCA’s US Capital Trends report shows. March deal volume was up 11% year-over-year, but deal activity for the total first quarter, however, was down 30% compared to Q1. Sales across the office, industrial, and multifamily sectors all increased, with hotel spiking even higher (thanks largely to one large portfolio of 200 properties).

And perhaps unsurprisingly, industrial continued to perform in Q1, with sales of individual properties reaching a record $14.4 billion in Q1 2021. Dallas continues to lead industrial construction, with starts up 67% year-over-year. The city also led the US for apartment construction during the COVID-19 era thus far, RCA said.