2016 Will be the Year of the NERDS
2016 will be the year of the NERDS
At the end of 2014 we introduced five office markets to keep an eye on for strong talent, affordable space and investment opportunity. A year later, they're certainly turning heads.
These secondary markets we affectionately call the NERDS—Nashville, East Bay, Raleigh-Durham, Denver and Salt Lake City—continue to attract investors and occupiers alike as the economy expands and larger metros overheat or tap out on talent. But as demand grows locally, so does pricing, and the window to catch these markets on the upswing is starting to narrow.
NERDS population growth is now 2.3 times higher than the national average, driven by young professionals seeking affordable homes, a high quality of life and increasing job prospects.
As secondary markets gain momentum, we're seeing above-average office performance as well.
In 2015, NERDS reported occupancy growth of 7.9 million square feet—1.9x faster than the US overall—while still offering close to a 25 percent discount on asking office rents.
Rent pressures from high leasing demand and underbuilding have greased the wheels for development. 8.9 million square feet of space is under construction across NERDS markets, and that’s expected to continue until at least 2017.
NERDS markets continue to attract capital because investors are able to acquire core product without sacrificing yield like they would in primary markets. Average pricing per square foot for Class A buildings ranges between $150 and $300, and investors are taking advantage of discounted cap rates ranging between 4.9 and 6.1 percent.
If they haven’t already, corporations looking to open satellite offices or relocate can find space in the NERDS markets at a fraction of the price.
Want to learn more about the NERDS? Download our complete Office Perspective report.