Office Top & Bottom Markets, Q4 2018

Office Top & Bottom Markets: Effective Rent Growth

The national year-over-year effective revenue growth rate for the office sector was 2.3% in the fourth quarter. Just like in the third quarter, Memphis and San Francisco occupy two of the five top spots on the left half of the chart. San Jose had a growth rate of 6% and Denver had a growth rate of 4.1%, but the rest of the top markets had very similar growth rates of 3.8%, plus or minus a few basis points due to rounding. Unlike in the apartment sector, all the bottom markets had a year-over-year performance that was negative, but not overwhelmingly so. For reference, the worst performing market on the chart, New Orleans, had an aggregate growth rate of -2.0%. Three of the markets in the bottom five – New Orleans, Houston, and Tucson- were also in the bottom five last quarter.

Effective Revenue Per Square Foot, Percent Change 2017Q4 – 2018Q4

Source: Reis, Real Estate Solutions by Moody’s Analytics


Looking at the property-level distributions, however, the median property likely had positive performance – even in the worst markets. In markets such as Houston and Fairfield County, where the distribution clearly shows a large proportion of properties with very negative growth rates dragging down the aggregate numbers, a significant portion of the properties had positive performance. As an example, slightly over half the properties in those two metros had positive (not flat, but strictly greater than 0%) year-over-year growth rates.


Analysis by Victor Calanog, PhD CRE®. Calanog is the Chief Economist & Senior Vice President at Reis. He and his team of economists and analysts are responsible for the firm’s market forecasting, valuation, and real estate portfolio analytics services. He holds a PhD in Applied Economics and Management Science, trained by a dissertation committee composed of faculty from the Wharton School of the University of Pennsylvania and Harvard Business School.


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