The single-tenant office market set two new records in 2021.
Rumors of the office market being dead are just that–rumors. It’s true there may still be some uncertainty about the future of the sector, but tenants and investors alike are largely in agreement that office space, in some form, will play a vital role in the long-term strategies of many companies. Post-pandemic, the market’s renewed confidence has been illustrated by strong investment sales activity and high-profile transactions in recent months. In fact, the single-tenant office market set two new records in 2021.
First, a new high-water mark was reached for annual sales volume with nearly $29.3 billion posted for the year. Secondly, an incredibly strong fourth quarter, where approximately $10.1 billion in sales were logged, resulted in a new quarterly record as well. Momentum has carried into early 2022, and first quarter saw sales volume reach nearly $6.9 billion. It should be noted, however, that a single asset sale in the Northeast–Google’s purchase of a Manhattan office building–contributed $1.9 billion of the quarter’s activity. Still, even without this one transaction, activity in the single-tenant office sector has seen noticeable growth in the months and quarters following the onset of the pandemic. As market conditions shift though, we’ll be watching the office sector closely to see if and how demand levels are impacted. We will also be watching cap rate movement. At an average of 6.2 percent at the close of first quarter 2022, office cap rates are the highest by sector in the net lease market, although they’ve been compressing over the last year. Within the next quarter or so, it’s highly likely that those averages will begin to climb.
Lanie Beck joined Stan Johnson Co. in 2013. She oversees the firm’s corporate research efforts, publishing the quarterly MarketSnapshot report, the Viewpoint series of whitepapers and a variety of other thought leadership content. Beck is also responsible for leading Stan Johnson Co.’s corporate marketing, communications and public relations strategy, including the coordination of the firm’s social media presence, industry conference and event sponsorships, as well as management of the brand.
—Posted on May 23, 2022
