Transaction Volume and Prices Down Coast to Coast

Good morning,

Transaction volume and prices are down coast to coast, and Texas' major cities see slowing office job growth and weakened office demand. Let’s delve into today’s topics.

📈 Market Update

🏢 Transaction Volume and Prices Down Coast to Coast

Slumping East Bay Commercial Property Sales Skew Toward Industrial:
Despite an overall slump in property sales in California's East Bay through August 2023, totaling just $2.1B compared to over $7B in 2022, the industrial sector continues to see the most resilience and activity, making up nearly 60% of volume so far this year. Other property types like retail and multifamily have seen declines in sales, while the office sector has been hit the hardest amid rising vacancy rates, with owners divesting properties at deep discounts compared to recent sales. Overall sales activity across sectors is expected to remain depressed until economic conditions improve.

Pandemic Empties Boston and Portland Office Towers, Depressing Values:
The office markets in Boston and Portland are struggling with high vacancy rates and declining property values in the wake of the COVID-19 pandemic's disruption of downtown working patterns, with Boston's vacancy around 30% for older "Class B" spaces and sales prices slumping, while Portland faces an even more dire 31.5% total vacancy rate that has left its downtown skyline dotted with near-empty towers and loans coming due, presenting a bleak outlook for the city's commercial real estate sector.

🤠 Texas' Major Cities See Slowing Office Job Growth and Weakened Office Demand

The Texas metropolitan areas of Austin, Dallas-Fort Worth, Houston, and San Antonio have all seen slowing growth in office-using jobs like professional services, finance, and tech - down from peaks in 2021 - leading to weakened office space demand, with Austin especially impacted due to its tech concentration, Houston seeing tenants leasing 12% less space, Dallas-Fort Worth having high vacancies despite new construction, and San Antonio impacted by layoffs, altogether indicating challenging near-term conditions for Texas office real estate markets.

Austin Residents Flock to Cheaper San Antonio Suburbs:
With home prices remaining high in Austin despite cooling off from their peak, data shows around 20% of new residents in the San Antonio metro area moved from increasingly unaffordable Austin, opting for more budget-friendly suburbs between the two cities along the booming I-35 corridor.

✍️ Further Reading

• Capital Markets Forecast Calls for Cap Rate Stabilization, More Transactions (GS)

• Student-Loan Restart Threatens to Pull $100 Billion Out of Consumers’ Pockets (WSJ)

• Billionaires’ Row in NYC Retreats from Its Shock-and-Awe Pricing (BBG)

• Here's How a Developer Seeks To Turn His $3 Million Pit Into a Billion-Dollar Property (CS)

• Fed’s Policy Paradox: Too-Slow Growth Threatens Inflation Fight (BBG)

• Nightingale’s Elie Schwartz Used $12M of Investor Funds to Buy First Republic Stocks, Options (RD)

• Small Quebec Town Positions Itself for North America's Semiconductor Boom (CS)

• Multifamily M&A Returns After a Slow Start to 2023 (GS)

• New Household Formation Driving Multifamily Demand (GS)

📊 Chart of The Day