Over the past 20 years, the U.S. economy has been through a boom, a bust, and a hike. Each of these turning points altered the financial landscape and, consequently, the real estate industry. Undoubtedly, the protagonist in the story of the financial crisis has been the residential market–scarred by the demise of some major lenders like Lehman Brothers and what seemed like an endless string of home foreclosures. Nevertheless, the commercial real estate market had its own reckoning to face.
COMMERCIALCafé conducted an analysis of the U.S. office sales market between 1997-2017, using Yardi Matrix data focusing on market activity, transaction volume and key players at the national level. Additionally, data provided by Moody’s was used to draw a picture of the lending landscape before and after the financial crisis.
Top Markets and Key Players – Then & Now
After taking a massive dive following the market’s meltdown, office investment began perking up around 2010, and hit a post-recession peak in 2015. In most office markets around the country the next year brought a cool-down, as investors feared a repeat of the bubble and adopted a more cautious stance. Manhattan has maintained its position as the number one investment destination in the U.S., recording an increase in total transaction volume in the decade 2008-2017 of roughly $10 billion. Chicago, previously the third most sought-after office market, dropped three spots, while Texas office markets have had a remarkable surge after the recession, with Dallas jumping six places to number 10 in our ‘Top 20 Markets for Office Investment’ ranking.
Even more dramatic shifts show up when we narrow our attention to the top 10 office buyers during the past two decades. Of the initial key players, only three managed to hold on to a spot on our post-recession list, although their current ranking is a lot more modest.
Tishman Speyer, which amassed $18.6 billion in sales volume before the financial crisis and was the number one office buyer of the decade, made a series of big bets that cost it when the market took a downturn. Equity Office Properties, once the runner-up, has slipped five places in the decade following the crisis, but nevertheless keeps its place among the top 10 investors, albeit with a 62% decrease in transaction volume over ten years.
To find out more about the evolution of office transaction and lending trends, and to see which markets went up or down after the recession, read the full story on the COMMERCIALCafé blog.