It’s probably not surprising to industry observers that San Francisco took first place in a recent survey conducted by PricewaterhouseCoopers and the Urban Land Institute, Emerging Trends in Real Estate 2014. After all, the city is centered in the country’s strongest tech region and property values across the board reflect this distinction.
However, there are some smaller markets, such as Seattle and Austin, that some might not have expected to make the cut.
Let’s take a quick look at each of the top 10 commercial real estate markets, as ranked by PWC and ULI:
1) San Francisco: Vacancy is down, rents are up, construction is happening, and transactions are on the rise, according to a Colliers International report on the San Francisco office market. Class A rents rose 6.3 percent from last year’s fourth quarter, hitting $72.98, and 2.8 million square feet of leasing took place in the second quarter alone. Office landlords can thank the robust job market—there is only 4.4 percent unemployment in the city.
2) Houston: Houston’s thriving energy industry leads Texas’ strong economy in comparison to the rest of the country. The industrial market continues to maintain its strength, in part due to a 5.1 percent unemployment rate, according to a second-quarter JLL report. Asking industrial rents, at $5.44 per square foot, rose five percent year over year, and over 2.6 million square feet was absorbed in the first half of the year.
3) San Jose: It stands to reason that if San Francisco is strong, then the nearby tech hub is faring well, too. The San Jose / Silicon Valley office market is unique to other parts of the country in that new construction is taking place, according to a Cassidy Turley report on the region. In addition to experiencing increased occupancy, absorption and asking rents, 4.2 million square feet of office product is underway.
4) New York City: The office market in Manhattan has recovered quickly from the recession, and big leases are getting signed downtown. Rents continue to creep up, and there was 566,000 square feet of leasing in July alone, according to a recent CBRE report.
5) Dallas/Ft. Worth: Houston may lead Texas, but the commercial real estate market in Dallas is not far behind. “DFW’s employment growth is the second-most in the nation in absolute terms and the largest overall on a percentage basis among large metros,” says a Transwestern report detailing the area’s second quarter. And several industries are hiring right now, providing economic diversity.
6) Seattle: Seattle’s commercial real estate market might not be an obvious choice to crack the top 10, but the area has much going for it. Strong job growth by companies like Amazon.com is spurring new-office construction, with 925,000 square feet in the pipeline this year, says Marcus & Millichap.
7) Austin: Second-quarter office vacancy stood at 10.2 percent, down from 11.6 percent during the same period last year, reports Oxford Commercial. Asking rents and absorption are rising, while unemployment is at 4.1 percent.
8) Miami: During the height of the recession, Miami was hurt by enormous CRE overbuilding. It’s not that way any more. Average asking rents in the office sector are at $30 per square foot, the highest they have been in years reports Colliers South Florida. Vacancy rates are also extremely low in the industrial and retail sectors.
9) Boston: The population in Boston increased 4.6 percent from 2010 to 2013, yet unemployment continues to fall, says JLL. As a result, development is taking place across many commercial real estate sectors, including multifamily, office, and retail. Oxford Properties also has faith in the market, recently spending $2.1 billion for five assets.
10) Orange County: Orange County is another area that took a big hit during the recession, but has recovered well. Office vacancy rates are decreasing, while asking rents and absorption are on the rise, says DAUM Commercial Real Estate Services. Additionally, unemployment in the second quarter declined to 5.2 percent from 6.5 percent during the same period a year ago.