Report: Oakland and Sacramento Top Office Properties’ Buy List

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The Oakland City and the Downtown

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Ten-X Research identifies Oakland, Portland, Sacramento, Dallas and Atlanta as top ‘Buy’ markets for office investors

IRVINE, Calif. and SILICON VALLEY, Calif., (July 18, 2017) — Ten-X Commercial, the nation’s leading online real estate digital marketplace, today released its latest U.S. Office Market Outlook, including the top five “Buy” and “Sell” markets for office properties. The analysis shows a sector that has continued its agonizingly slow recovery into 2017, but faces the prospect of rising cyclical risks associated with slower employment growth.

The report pinpoints Oakland, Calif., Portland, Ore., Sacramento, Calif., Dallas and Atlanta as the five U.S. cities showing the greatest promise as “buy” opportunities for investors of office properties. Concentrated largely in the West, these markets are boosted by growing populations and strong employment, keeping rents high even as supply additions loom on the horizon.

The Ten-X analysis also identifies Memphis, Tenn., Baltimore, Houston, Fort Worth, Texas and Suburban Maryland as areas where investors may wish to consider selling office assets. While the respective employment climates in these markets vary considerably, each is seeing rents decline as new supply meets with slow or even negative absorption rates.

The report specifically highlights slowing employment gains across much of the country. Limited job creation – a dynamic arising in a labor market approaching full employment – is likely to suppress the need for companies to add to or expand their office space requirements, slowing absorption.

The Ten-X analysis notes that vacancies remained flat to start the year and have subsequently hit the midyear point with no improvement yet this year and at 16 percent flat with a year ago. Vacancies remain at a level far higher than during the prior expansion. Stalled vacancies have resulted in lower rent growth, with rents advancing at their slowest pace since 2012. Ten-X expects vacancies to reach a cyclical trough of 15.3 percent in 2018, however the firm’s downside recessionary model foresees vacancy levels reaching 17.6 percent by the end of 2020, which would be on par with their recessionary peak in 2010.

The Office Market Outlook took note of changes in both technology and workplace culture that have combined to reduce the market demand for office space. The growth of cloud computing has decreased the need to devote on-location space to servers and computers, while the increasing obsolescence of paper filing also lowers space requirements. At the same time, the growing embrace of open-floor plans is lowering the square-foot-per-worker ratio.

“While we’re seeing tepid growth nationally, office investors have to be aware of cyclical risks associated with subdued job growth. It is noteworthy that our analysis resulted in downgrades in 17 regions, and an upgrade to only one,” said Ten-X Chief Economist Peter Muoio. “That said, a number of economically vibrant metro areas around America are seeing high levels of absorption and present buyers with strong investment opportunities.”

While office rent growth has slowed in recent quarters, Ten-X expects growth to reach the mid-2 percent range on an annual basis in 2018. The company’s downside recessionary model expects office rents to contract by less than 1 percent by 2019 and by less than 1.7 percent by 2020 as vacancies reach recessionary levels.

The Office Sector’s Top Five ‘Buy’ Markets:


Employment levels in Oakland are at an all-time peak, highlighted by a 2-to-3 percent rise in the professional/business services sector. While local employment and population are both on the rise, a cooldown in regional tech growth may incur some downside risk for the area. First-quarter negative absorption pushed vacancies to 14 percent, but that figure is 70 bps lower than a year prior. A year of vigorous growth has elevated effective rents to an all-time high. Even under the Ten-X downturn scenario for 2019-2020, a general absence of incoming supply is expected to prevent Oakland from suffering a dramatic rise in vacancies.


While Portland’s professional/business services sector has cooled significantly, the city’s steady economic expansion is being supported by booming construction and financial services sectors. The city has also experienced four straight years of population growth and an unemployment rate well below the national average. Rising demand for office space limited the impact of a busy supply pipeline, with office vacancies declining to the mid-12-percent range. With office demand on the rise and effective rents at all-time highs, Ten-X predicts NOI growth to average 4.8 percent per year through 2018 before tamping down mildly under the 2019-2020 recession downturn scenario.


While annual job growth in 2017 was only in the upper 1 percent range, employment in Sacramento now stands 4 percent higher than its prior peak. Growth has been minimal in the government sector, but education/healthcare services employment has surged at a rate north of 4 percent. Despite an almost-empty supply pipeline, vacancies in Sacramento stand near recessionary highs in the 18 percent range. Rents are below their prior peak, having risen less than 2 percent year-over-year over the past five quarters. However, Ten-X predicts strong demand for office space to continue through 2018, tightening vacancies amid the quiet development pipeline to the mid-16 percent range.


Though metro unemployment rose above 4 percent in early 2017, the overall Dallas economy is enjoying a healthy expansion, and overall employment is at an all-time peak. The professional/business services and financial services sectors are growing at particularly brisk rates, with job numbers increasing year-over-year at 3 and 5 percent, respectively. Despite the city’s economic growth, equilibrium between supply and demand has kept vacancy levels in the 21 percent range for the past two years. While this vacancy rate is high by the standards of most markets, it is at a level that is generating rent growth. Office rent growth has been robust, and rents are projected to reach all-time peaks in 2018, as the availability rate falls below 20 percent. The Ten-X recessionary downturn scenario for 2019-2020 anticipates blows to the Dallas market, with declining rents and diminished NOI.


By mid-year, vigorous economic growth is expected to drive Atlanta’s total employment to a level 10 percent higher than its pre-recession peak. The robust local economy has been supported by growth in the professional/business and financial services sectors, with an added boost coming from the information sector, now growing at a pace in the high 3 percent range. Metro office vacancies range around 18 percent, some 300 bps below their recessionary peak. With office rent climbing by 3 to 4 percent over the past two years, Atlanta rents now stand at an all-time high above $19 per square foot. But the Ten-X downturn scenario foresees diminished NOI in both 2019 and 2020.

The Office Sector’s Top Five ‘Sell’ Markets:


Memphis’ overall economy has borne the negative effects of a slowdown in jobs in the transportation/utilities sector, and total employment has grown at a pace below 1.5 percent over the past year. The city’s unemployment rate exceeds the national average, though it is 60 bps lower than a year ago. The office market suffers from poor demand, with negative absorption elevating vacancies to 24.1 percent – 90 bps higher than a year ago. Memphis will take on more than 700,000 square feet of new supply during 2018, which will restrain rent growth to 0.5 percent in the same period. Rents are expected to decline in both 2019 and 2020, according to Ten-X, while NOI is expected to contract every year from 2017 to 2020.


While Baltimore’s overall employment recently surpassed 1.4 million jobs, the pace of job growth has been slowing. The city was hurt by an increase of only 1 percent in office-using employment, well below a national average in the 2.5 percent range. Unemployment stands just above the national average of 4.5 percent, and the city has seen a deceleration in population growth in each of the last five years. Vacancies have lingered in the high 15 percent range for four straight years. Rent growth lags far behind the national average, and rents would decline by an average of 2.1 percent in 2019 and 2020 under the Ten-X recession downturn scenario. Ten-X forecasts NOI growth of just 1 percent in 2018, followed by an average decline of 3.9 percent in 2019 and 2020.


While the oil fallout continues to assault the Houston economy, employment growth reached the mid-1-percent level in 2017. Hospitality saw a job surge in the mid-3 percent range, while the professional/business services and construction/mining industries lagged. At 5.8 percent, Houston’s unemployment level climbed 50 bps year-over-year, but population growth continues to exceed national levels. With negative absorption in three of the last four quarters, vacancies climbed 250 bps from a year ago, reaching a new high of 18.2 percent. The Ten-X recession downturn scenario sees Houston’s vacancy level surpassing 20 percent in 2019 and 2020. Rent growth has been advancing a rate below 1 percent, and the recession forecast sees rents suffering 4 percent average declines in 2019 and 2020.

Fort Worth

Fort Worth is emerging from an oil-related slump, with employment growth in the mid-to-high 2 percent range. Though office-using employment rose only 1.4 percent over the last year, this still outpaces the rate seen over the prior two years. Flat from a year ago, Fort Worth unemployment remains below the U.S. average at 4.2 percent. However, thanks to recent negative absorption, vacancies rose 40 bps from a year ago to 13.8 percent. Rents increased just 1 percent year-over-year, significantly below the national average. The Ten-X recession downturn scenario forecasts rents declining in 2019 and 2020, with NOI growing by only about 0.8 percent per year through 2018. Ten-X also projects NOI declines in the mid- to high-2 percent range in 2019 and 2020.

Suburban Maryland

Suburban Maryland has seen recent growth in the professional/business services sector, which accounts for more than one-fifth of the region’s jobs. Unemployment had been falling for several years, but now has stalled at around 3 percent – a figure below the national average. A recent population surge has cooled, with the region posting a population increase of just 0.6 percent in 2016. Negative office absorption has helped boost vacancy rates in five of the past six quarters. The report foresees rental growth at a 1.3 percent pace through 2018, a figure behind the national rate. But tepid absorption and rents will keep NOIs down, with contractions sharper than the national average during the Ten-X 2019-2020 downturn scenario.

About Ten-X
Ten-X is the nation’s leading online real estate transaction marketplace and the parent to Ten-X Homes, Ten-X Commercial and To date, the company has sold 292,000+ residential and commercial properties totaling almost $48 billion. Leveraging desktop and mobile technology, Ten-X allows people to safely and easily complete real estate transactions online. Ten-X is headquartered in Irvine and Silicon Valley, Calif., and has offices in key markets nationwide. Investors in the company include CapitalG (formerly Google Capital) and Stone Point Capital. For more information, visit

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