2018 Office Sales Volume & Cap Rates

The single-tenant office sector reported its lowest quarterly volume since mid-year 2012 in the first quarter of 2018, while cap rates in the segment increased by a single basis point.

Sales volume vs. average cap rates

Source: Stan Johnson Co. Research, Real Capital Analytics

The single-tenant office sector had a lackluster Q1 2018, reporting only $2.8 billion in sales. This is the lowest quarterly volume reported since mid-year 2012, and it represents a nearly 50 percent decrease in sales volume from this time last year. Of all the regions, only the Mid-Atlantic saw a quarter-to-quarter increase in volume, with the Southwest and West regions reporting drastic declines. This drought is expected to be short-lived though—the pipeline of on-market office listings across the U.S. is robust and strong sale leaseback activity has positively influenced this sector in recent quarters. Average cap rates for single-tenant office product increased by a single basis point in the last three months, ending first quarter at 6.5 percent, which is the highest average across the different property classes. It remains to be seen if this is the start of a sustainable uptick in cap rates, or if we should expect to see several more quarters of a flat trendline.

Focusing on business development, industry and client-specific research, and the analysis of local and national market trends, Lanie Beck has been the Director of Research for Stan Johnson Co. since 2013.

—Posted on July 11, 2018


Sales volume vs. average cap rates

Source: Stan Johnson Co. Research, Real Capital Analytics

Single-tenant office sales volume outpaced the other property types in Q4 2017, reporting nearly $5 billion in sales. This brings annual totals to approximately $22 billion, which is on par with volumes reported in the two previous years. After three consecutive quarters of cap rate compression, and an even longer downward trend that began in 2009, average cap rates ticked up a single basis point at year-end 2017, closing out the year at 6.5 percent. Compared to single-tenant industrial and retail, office cap rates are currently the highest of all three sectors by six and 44 basis points respectively. We expect cap rates to bounce along the bottom for at least the next several quarters before beginning noticeable and sustained upward movement.

Focusing on business development, industry and client-specific research, and the analysis of local and national market trends, Lanie Beck has been the Director of Research for Stan Johnson Co. since 2013.

—Posted on April 18, 2018


Sales volume vs. average cap rates

Source: Stan Johnson Co. Research, Real Capital Analytics

Overall single-tenant sales volume surpassed $14 billion in Q3 2017, making it the strongest quarter so far this year. The office sector, however, posted lagging totals compared to the other property types. With a $0.45 billion decline from the previous quarter, the single-tenant office sector reported its lowest quarter of volume in a year with just over $5 billion in sales. Average cap rates for single-tenant office product witnessed a very small decline, falling just four basis points since mid-year. At 6.5 percent, office cap rates currently sit between retail (6.1%) and industrial (6.7%). This continued compression across the industry, albeit it fairly insignificant, continues to illustrate the “U-shaped” cap rate trendline that we’ve been experiencing for the last 18+ months. Looking forward, we expect cap rates to bounce along the bottom for another several quarters before beginning noticeable and sustained upward movement.

Focusing on business development, industry and client-specific research, and the analysis of local and national market trends, Lanie Beck has been the Director of Research for Stan Johnson Co. since 2013.

—Posted on Jan. 30, 2018