Office Sector Starts to See Positive Momentum
Industry observers are finally seeing some tailwinds in the office market after basically facing a perfect storm of negativity for so long.
Panelists at the Blueprint Conference in Las Vegas this week are sensing greater employee satisfaction when it comes to skipping remote work.
Office demand in the top eight markets was up 17 percent year-over-year as of the second quarter, according to the VTS Index, which measures demand. It was also 34 percent higher than before COVID-19, and there have been 12 consecutive months of month-over-month growth, according to Nick Romito, co-founder & CEO of VTS.
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“Working in an office gets you out of your house, which allows you to do the things you want to do, like go to a concert or to be downtown, said Jamie Hodari, co-founder & CEO of Industrious, said.
“Whether you’re going into the office five days a week or three days a week, you still need the same amount of office space,” Lisa Picard, managing partner, Oxygen Investment Management.
Looking forward
The panel talked about ‘the future of office’ during the session.
“I don’t know what the future of the office is going to be other than I know it needs to have people in it,” said Lisa Picard, managing partner, Oxygen Investment Management. “We need to provide areas that offer comfort, convenience and collaboration. The office is a place where you can exhale and conduct life administration.”
Hodari said the seemingly trendy “hotel-iffication” of office buildings is a bit phony in terms of them providing boutique services.
“Offices need to be set up so that you can also conduct your daily life during the day and provide opportunities for employees to enrich their careers,” he said.
Picard said a massive shakeout must occur, particularly of older buildings, to continue the office sector’s recovery. “No one is going to invest in it until someone takes a hit,” she said.
Hodari is looking for positive vibes. “When the winds of change come, you can either build walls or open windows. Too many people are building walls to protect themselves. They should instead look for opportunities.”
Discount office building sales ramp up
Commercial Property Executive reported this week that the past several months had witnessed a surge in office building sales, with investors mostly snapping up distressed assets, often at or near the value of the land they occupy.
Much of the office product trading at deep discounts consists of lower-tier and substantially vacant buildings. However, some institutional-grade assets in desirable locations are also changing hands at lower-than-expected prices.
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