Year in review: The 5 biggest commercial real estate stories of 2014
Jan 2, 2015
2014 has come and gone, and what a year it was for commercial real estate — rents soared, big buildings sold for even bigger price tags, and various markets are back to pre-recession levels. Today, we look back at some of the biggest stories from last year.
1) CRE exceeded expectations
We anticipated a strong year across the commercial real estate sector, but what a banner year it turned out to be for the CRE industry. In cities across the country, office vacancies dropped, multifamily rents rose, and legacy buildings with prominent addresses sold for huge amounts. We continue to see arrows pointing upward, especially in the multifamily sector as new developments come online and rental properties remain popular. The U.S.’s economic growth helped spur new development and transactions and gave us lots to read about in 2014.
2) Big cities are commanding bigger prices
While New York City remained the king of headline-making commercial real estate transactions in 2014, other cities throughout the country saw properties fetch massive price tags throughout the year. Philadelphia saw more than $1 billion in transactions, and Houston’s growth potential made it a top market for both investment and development. Finally, a strong year of sales pushed Boston’s total property value past the $100 billion milestone.
Foreign investors put plenty of money in U.S. cities as well. Chinese investors paid cash for properties in Seattle, while the Waldorf Astoria hotel was sold to a Beijing-based company for $1.95 billion in November.
3) The energy boom fuels development
2014 was a huge year for the U.S. energy sector, and many regions across the country reaped the benefits of the oil and gas boom. Cities big and small near oil wells saw a commercial development boom, as drilling remained steady for much of the year. Office rents remained high in Dallas, a major hub for oil and gas companies, and new office construction continued to come online throughout the region.
Even Denver, a city out of the way of major production sites, saw office and rental property rates increase after a number of energy companies moved their headquarters’ to the Mile High City.
4) Tech firms need office space — and a lot of it
Since the tech world’s biggest players, such as Amazon, Microsoft, and Google, call big cities like Seattle and New York City home, they’re constantly gobbling up available office space in these hot regions and squeezing smaller firms out of the traditional tech hubs. But in 2014, secondary markets began to benefit from that trend.
Smaller firms are now moving to secondary markets, such as Phoenix, San Jose, and Charlotte. As a result, office rents in these markets are rising, and cities not typically considered tech hubs are now bolstering their office markets.
5) It’s a hot market in South Florida
The Great Recession hit Florida hard, causing thousands of foreclosures and a stand-still commercial real estate market, but South Florida rebounded big time in 2014. Last year, 18 properties in the region — almost half in Miami-Dade County — sold for more than $100 million, and one of the largest private real estate developers in the nation, Miami Worldwide, received approvals to build new residential towers, retail spaces, an expo center, and a hotel in downtown Miami. For more on the Miami market in 2014, check out our blog post on how foreign investment has transformed the condo market.
There you have it, the biggest commercial real estate stories of 2014. Check back soon to see IRR’s predictions for 2015 in our annual Viewpoint trends report.
Author: Raymond T. Cirz