Following up on our Q1 Texas office sales report, we again turned to Yardi Matrix data and analyzed all sales of office buildings larger than 50,000 square feet to close at over $5 million, during 2017’s second quarter (see Methodology).
Overall, the Texas office market is performing well and developers have been particularly busy—6 million square feet of new office space was delivered to the market in Q2, matching the 6 million square feet that traded during the same quarter. The combined Texas office markets are still coming down from the heights reached during the second half of 2016. There were no major sales closed on the San Antonio office market during this past quarter, and sales activity in the top-tier markets of Austin, Houston and Dallas-Fort Worth wrapped up at 34% below Q1 dollar volume. While sales have taken a bit of a dive, the average price per square foot for Texas office space held above the $200 mark for the fifth consecutive quarter.
Find the key takeaways below and read on to see how the Lone Star State office markets fared in Q2:
- Sales volume dips below the $1 billion mark
- Average price per square foot holds above $200, second-highest in 5 years
- Houston logs priciest deals; DFW most active Texas market
- 6 million square feet of office space delivered in Q2, more to come in Q3
Q2 Sales Volume Slides Below $1 Billion
During 2017’s second quarter, office sales volume dipped below the $1 billion mark, and it was the first Q2 in five years to do so. The $886 million amassed in disclosed-price transactions marks a 22% slip year-over-year. However, the fact that Q2’s dollar volume is 43% lower than the five-year quarterly average of $1.5 billion is no real reason for concern. Texas’ combined office markets are generally stable, although the trailing five years averages are skewed by the record-high numbers seen in Q4 2015 and Q4 2016, as well as the record slump of Q1 2016.
The Dallas–Fort Worth Metroplex was the most active of the Texas markets, as 15 deals closed here during the second quarter, and carried almost half of the total Q2 sales. Houston followed closely behind, with $370 million in sales, while Austin concluded Q2 with just over $108 million in disclosed deals.
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