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Commercial Office Sector

Urban and suburban office structures

Since 1951

Commercial Real Estate

Commercial real estate is any non-residential property used for commercial purposes. Commercial real estate consists of office, industrial, retail, multifamily, hotels, land, and special purpose properties.


BY Austin Sharp, CCIM   |  

Commercial Office Sector in Amarillo and Other Metros in Texas

The commercial office sector is a hot market in commercial real estate investing. The office building asset class includes high, mid or low-rise structures. It accounts for twenty percent of to total commercial real estate market. Investing in office buildings has a unique set of challenges because historically it is the most volatile CRE sector. The investment analysis starts with a market report and continues with a property report. When looking for an office building to purchase, Mays commercial real estate is a reliable source. Whether the building’s located in an urban or suburban setting, or another Texas market, we will  find the right place.

Categorizing Office Buildings

Office buildings are generally categorized into two types: urban or suburban. Metropolitan office buildings are found in cities and include skyscrapers and high-rise properties. Some may even total as much as a few million square feet in size. Suburban office buildings are usually smaller in stature and sometimes grouped in office parks. They can be a multi-tenant facility or single tenant office building. Many department properties are build-to-suit. The Building Owners and Managers Association International ranks office properties in three different classifications as follows:

  • Class A: Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high-quality standard finishes, state-of-the-art systems, exceptional accessibility and a definite market presence.
  • Class B: Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price.
  • Class C: Buildings competing for tenants requiring functional space at rents below the average for the area.

Market Factors

An investment analysis driven by regional and local economic trends that include white collar job growth and economic growth in the market where you plan to invest in an department asset. Market analysis is recommended at both the regional and local level to better understand your position before purchasing an agency asset. There are also some important supply-side indicators that need to be considered before you purchase an office property:

  • Vacancy Rate: Rising vacancy rate leads to a decline in the rent per square foot and increase in tenant turnover.
  • Absorption Rate: The amount of new office space in a market over a period of time. If absorption rates are rising, rent prices should be rising depending on overall vacancy rate.
  • Market Supply: Nearby supply of Class B and Class C buildings can keep price growth flat even with a declining vacancy rate and rising absorption rate.

More About the Market

Market factors regarding an office asset can also be influenced by what kind of tenant the space would attract in a given market. A building that is focused on research and development attracts a specialized tenant while a standard building in a suburban setting attracts a broader range of tenants.

There are riches in the niches. An office building designed for a particular purpose of business type, for example a building in the arts district or a hospital district attract a very specialized tenant who is wiling to pay a higher price per square foot to be located in that commercial space.

The amount of rentable area on one whole floor, or a floor plate, commonly known as the “footprint” in commercial real estate. Square footage per floor plate is important because if it is too large, it may lessen the appeal of the internal space. The same is true if the floor plate is too small.

Mays Provides the Background Comps

Mays, of Amarillo, TX, provides vital information to help you make an informed decision regarding your commercial real estate investment. We give clients useful data about the construction of the property, such as the building year, if there had been any updates, as well as unit sizes. We provide ratios of rental and vacancy rates to ensure the location is a proper investment for potential buyers. In addition, Mays locates information about licensing and operating expenses of the property and looks out for possible competition in the surrounding area. Along with this, we provide a variety of reports:

  • Market Reports: Firstly detailed research on market shifts, changes in technology, and the economy near the property.
  • Submarket Reports: Data on specific submarkets or neighborhoods within a specific metro market.
  • Metro Reports: Historical trends that are a foundation for any precise market analysis.
  • Rent Comps: Rent comps help investors evaluate property performance as compared to its competitors.
  • Sales Comps: See properties similar to the one you want and find out what they have sold for before making financial decisions.
  • New Construction Comps: All in all stay informed about upcoming, completed, or current projects that are under construction in the area they you are looking to purchase property.

Information and Resources for Mays in Amarillo, TX

For more information about the resources we offer commercial real estate property investors, see Mays Market Reports and Mays Property Reports. Or if you need specific information or have a question, visit our Question and Answers or Contact us.


Sources

Marsh, A. (2018). The 6 Types of Commercial Real Estate Properties..

Duggal, A., Duggal, A. and Duggal, A. (2018). Investing in Office Buildings.