Here Are the Top Cities for Office Investing

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.”