Higher Interest Rates Showing Up in Office Sales Numbers
Uncertainty about valuations also plaguing recent transactions.
The impact of higher interest rates and uncertainty about office values looks to be weighing on transaction volumes as the end of the year approaches.
According to Phil Mobley, national director of office analytics at CoStar Group, that’s what he’s hearing from clients.
“This is what we have been expecting,” Mobley said. “It seems that it is finally beginning to show in the numbers.”
CoStar has tracked approximately $118 billion in sales for 2022, including $8.6 billion so far in Q4.
“We will almost certainly finish the year well below 2021’s $156B, which, granted, was a strong year for transaction volume, particularly Q4, which alone saw $59.6B,” Mobley said.
CoStar reported that Q3 2022 volume was approximately $35.9B, down about 14.5% from Q3 2021
August and September volumes were each down ~25% vs. 2021, and October volume looks to have been down more than 40% vs. 2021, the firm added.
Transactions: National Sales Volume Surpasses $75 Billion
Yardi’s CommercialEdge has recorded $76.34 billion in office transactions between Jan. 1 and Oct. 31.
Of this, Manhattan sales represented $5.56 billion, while the Bay Area, Boston, New Jersey and Washington, D.C. totaling about $4.1 billion in sales each.
“Four more markets surpassed $3 billion in sales, with some expected to surpass the $34 billion marker before the year is out,” according to its recent report.
Among them is Dallas, which had a year-to-date sales volume of $3.94 billion at the end of October. Overall, of the country’s leading 25 office markets, only four had sales volumes under $1 billion.
Life Sciences Makes Boston a Hot Market
Commercial Edge rates Boston among the hottest office markets for transactional activity.
It has been the third -most active market this year by sales volume, largely driven by life sciences.
Meanwhile, although Boston and the Bay Area posted year-to-date sales prices of over $400 per square foot and Manhattan at well over $800 per square foot, the national year-to-date price per square foot clocked in at $261.