Office Pricing Hits High Note Despite COVID Fears
It has reached an all-time high this year of $291 per square foot.
Office deals hit $6.8 billion through November, a number that’s still below pre-pandemic standards but is 11% higher than 2020 figures.
New data from CommercialEdge notes that despite the recent downtown and the uncertainty around the future of the sector, the average sale price of office assets has not fallen. To the contrary, it’s hit an all-time high this year, at $291 per square foot. And perhaps even more surprisingly, “this has not been driven by a shift in the mix of assets that are sold, as the split across location and asset rating classes remains roughly the same as it was pre-pandemic,” a CommercialEdge report breaking down November data notes.
“Investor confidence in high-quality assets played a significant role in the stable evolution of prices this year, offsetting uncertainties brought on by the pandemic,” CommercialEdge’s Irina Lupa says.
Sales volume was highest in the Bay Area, eclipsing $7 billion, followed by Manhattan, which hit more than $5 billion in sales by the end of November, and Boston, which rang in at $4.9 billion.
Manhattan’s sale price per square foot was also highest of all markets CommercialEdge tracks, coming in at an average of $1,267 per square foot. San Francisco prices came in second at $666 per square foot, followed by Seattle ($558/sq. ft.) and the Bay Area ($523/sq. ft.).
Seattle also surpassed the $4 billion mark in overall deal volume, clocking in at $4.3 billion. Meanwhile, Chicago, Phoenix and Charlotte are the latest markets to surpass $1 billion in office transactions.
The report also highlights the increasing draw of flex space for occupiers.
“The last two years have been tumultuous for the office sector as millions of workers have remained remote and businesses have sought to reevaluate office footprints,” the report states. “While there has been much speculation as to whether remote work will become permanent, firms still need physical space for training, collaboration and culture building, and flex space is emerging as a solution.”