Office Market Advice

By Jim Woodard

May 29, 2015 3 min read

The office market is recovering nicely, particularly in areas with much high-tech business activity. Those technology-dominated markets are making the most headway, according to a new report from Reis Inc., a real estate research firm.

The top-performing office markets tend to be located in areas where technology companies are quickly expanding, Reis notes. Most notably, San Jose, California, the "Capital of Silicon Valley," saw rents soar 7.2 percent over the previous year, to $28.03 a square foot. It was the fastest rent growth in the country, according to the National Association of Realtors.

While tech companies are helping to boost office markets, areas that are dependent on oil are seeing a slowdown, according to Reis.

For example, Houston, which has nearly one-sixth of the office space under construction in the country, saw a jump in sublease space as energy employers looked to get rid of offices, Reis notes.

Q: Are mortgage payments higher than rents?

A: That depends on the local market. RealtyTrac, a source for housing data, recently released an analysis of residential rental properties purchased in the first quarter of 2015.

It found that the monthly house payment on a median-priced home is more affordable than the monthly fair market rent on a three-bedroom property in 76 percent of the U.S. counties included in the analysis.

Q: Is house flipping still popular?

A: In some areas, the practice of investing in homes for quick reselling has almost disappeared. In other areas, it's still very active.

Inkster, Michigan, tops the list of markets where flipped houses accounted for the highest percentage of its home sales in the nation. In Inkster, a Detroit suburb, flipped houses constituted 27 percent of its total 2014 home sales, according to the National Association of Realtors.

RealtyTrac recently evaluated housing markets to find out where flipped houses make up the biggest part of home sales. It defined a flipped house as a home that is bought, improved and resold within six months.

Q: How is commercial real estate faring in today's market?

A: It's doing exceptionally well. 2014 saw record mortgage origination volumes from life insurance companies and government-sponsored enterprises and the second-highest level on record for banks.

Only 2006 and 2007 recorded higher overall origination volumes. With property fundamentals and values continuing to improve and interest rates still extraordinarily low, last year's momentum has carried into 2015.

Jim Woodard's weekly column, "Open House," can be found at creators.com.

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