Here Are the Top Cities for Office Investing

Two Florida cities lead the list of Crexi's top 10.

Two Florida hotspots are the top cities for office investing in 2023, according to a new Crexi analysis.

Miami tops the list with its “robust economy, pro-business government, fantastic quality of life, and ideal geographic location,” Crexi analysts note, with an employment rate that’s ticked up 3.2% and kept office demand “solid and steady.” The city has just under 40 million square feet of inventory and overall asking rents of $47.65 per year. In addition, 3 million square feet of new leases have been signed year-to-date. On Crexi, average asking prices for Miami offices have jumped by 10.7% so far this year, while average occupancy rates have climbed almost 10% compared to 2021 absorption.

West Palm Beach follows behind with 1.5 million square feet of new leases signed this year and vacancy below 12%. Asking rents are at $42.84 psf and and just 613,000 sf of space is currently under construction. On Crexi, the median sold price per square foot for West Palm Beach offices this year-to-date was $275, compared to a median of $249 per square foot in 2021.

Raleigh-Durham rounds out the #3 spot; on Crexi, the city reported a median closing price of $311 per square foot so far this year, up from $224 last year.

It’s followed by Salt Lake City, Tampa/St. Petersburg, Fort Lauderdale, Austin, Nashville, San Diego, and San Antonio.

More than half of executives polled in a recent Ernst & Young survey say they plan to invest in commercial real estate despite the current economic environment, while two-thirds say they are either leasing or plan to lease suburban office space. However, investment numbers remain tepid: office investment activity was down 6% quarter-over-quarter in Q3, according to Newmark, and the firm also expects fourth quarter sales volume to be weak. Office loan originations in Q3 were down about 23% year-to-date over 2021 figures.

“The cost of debt is expected remain elevated. Fixed finance costs are up 2.4% year-over-year, and office cap rates are likely to adjust upwards in the private market, in keeping with a sustained higher cost of debt,” the Newmark report states. “The combination of the highest debt costs in years, office write-downs and a large quantity of debt maturing in 2023 and 2024 makes an increase in distress likely, albeit from low levels today.”