The last two years have seen an unprecedented change in the economic landscape. And as employers and workers continued to adapt throughout 2021, we’ve also witnessed a shift in commercial real estate. With more people working from home and less office space needed, investments in large warehousing and data center solutions continued gaining traction, while a sustained shift towards life sciences real estate was also noticeable on the market.
To find out more, CommercialCafe has recently carried out a study examining last year’s top 50 office transactions in the U.S. Targeting commercial buildings with at least 25,000 square feet, plus mixed-use properties with at least 50% of office space, they’ve uncovered some interesting insights and trends.
Here are the findings, broken down by region.
Northeast: Record-Breaking Deal Sees Cambridge in Pole Position
By all accounts, the Northeast dominates national rankings, with seven deals in the region making the top 10 and 16 deals making the top 50. Overall, the Northeast contributed around $12 billion to a total of about $26.3 billion for the entire top 50 transactions.
Taking the number one spot nationally, the sale of University Park at MIT, Cambridge, MA, brought in a whopping $3.4 billion for the region. This record-breaking deal smashed the previous one, the 2008 sale of the General Motors Building for $2.8 billion, making this an exceptional year for the Northeast.
Two other Cambridge deals breached the top 10, with the sales of One Memorial and One/Two Charles Park ranking sixth and ninth, respectively. This put Cambridge ahead of New York in terms of sales volumes, with a total of roughly $5 billion compared to about $4.29 billion. Boston also had three deals in the top 10. Notably, the sale of 401 Park took second place nationally and brought in over $1.1 billion for the Northeast.
New York City Slow Down
While there were seven New York sales in the top 50, only three made the top 10 this year, and none of those were in the top three. Indeed, NYC was outranked by Cambridge, Boston and San Francisco in this regard, and only the $1 billion sale of Hudson Commons saw it hit fourth place.
This hints at the ongoing slowdown of commercial real estate transactions in the city. Figures have been dropping over the last few years, from 19 NYC office deals making the top 50 in 2018 to just 11 in 2019. As investors diversify their portfolios, the trend to find office markets outside of NYC becomes increasingly visible with each annual ranking.
West: San Francisco Bay Area Dominates Regional Rankings
With 20 transactions in the top 50, the West outperformed other areas in terms of individual deals, bringing in a total of $9.3 billion in sales volumes. It also led with the highest number of portfolio sales in the top 50, with six transactions, all in California. The Village at San Antonio Center I & II in Mountain View was the most expensive, bringing in $630 million.
Of the 20 transactions in the West, 13 were in the San Francisco Bay Area, bringing in a total sales volume of $6.6 billion. In comparison, only three transactions from the south of California — one in Glendale, LA and two in San Diego — made the rankings. The top sale in San Francisco and the West as a whole was The Exchange on 16th, which sold for over $1 billion, taking third place nationwide.
Seattle, Second in the Region
When it comes to the west, it’s not all about California. Seattle was close behind San Francisco in terms of sales volume, with a total of around $1.78 billion compared to $1.88 billion. However, none of its four top 50 ranking transactions made the top 10. The highest selling Seattle property was 300 Pines, which ranked 15th.
South: Dallas See’s Largest Sale in the South
A total of 13 of the top 50 sales came from the South, amounting to a combined total of $4.66 billion. The largest of these transactions was the $700 million sale of The Crescent, Dallas. It took 11th place nationally, with no Southern sales making the top 10 this year.
While Dallas may have had the largest sale in the South, Charlotte, NC, performed best in terms of sales volume. Bringing in around $1.25 billion through four transactions, it was closely followed by Austin, TX, with about $1.20 billion over three transactions.
Midwest: Chicago’s 1K Fulton Alone in the Rankings
This year, the Midwest saw just one entry in the top 50 – Chicago’s 1K Fulton. The 562,792-square-foot property sold for roughly $355 million and was bought by the RMR Group. Built in 1921, it was only recently converted into office space, and the deal ranked halfway in the top 50, taking 25th place.
Summing Up: Signs of Growth and Shining a Spotlight on Life Science Facilities
The findings of the study show promise for real estate investors, with an increase in high volume sales. While in 2020, investors were far more cautious, and no deals breached the billion-dollar mark, fast-forward a year, and four of the top 50 deals went for over a billion dollars each, including the record-breaking sale of University Park at MIT.
In terms of the type of property invested in, one of the top-spending buyers in this year’s ranking, Alexandria Real Estate, stood out for focusing primarily on life science and technology facilities. It spent roughly $2.2 billion over three deals, and all are planned to be life science and tech hubs and campuses.
Interested in the office or shared spaces market in the cities mentioned in this study? Check out the links below: