CCP Commercial Office Digest

Commercial Office Digest

Callahan Capital Partners is a real estate private equity firm focused exclusively on the origination, acquisition and management of high quality office assets throughout the United States.

“Office visits are inching closer to 2019 levels nationwide, even in cities – like San Francisco – where a workplace recovery has been written off.”

Placer.ai reports on data indicating that a return to office is taking place. While the five-days-a-week model common pre-pandemic may not come back for many companies any time soon, the data does suggest that the workplace recovery has not yet reached its final conclusion. Read more here.

“Companies may have shrunk their portfolio too quickly or specific offices too much, and they're now rethinking how much space they need”

Bisnow reports on the expansion of office space for some tenants as firms continue requiring employees back into the office 3-5 days a week and office space needs evolve. Read more here.

“The market is well-positioned for increased capital markets activity in 2024.”

Despite CRE debt origination volume declining 52% year over year, and investment sales declining 62%, David Bitner, executive managing director of global research at Newmark, believes 2024 will be a return to increased capital markets activity. Bitner believes the combination of interest rate clarity from the Fed and buyers and sellers coming to agreement on price will lead to a break in the current market impasse. Read more here.

“Leasing activity remains robust for newer office buildings, some of which are charging record-high rents”

Emma Giamartino, CFO of CBRE Group, reinforced the vast difference in performance of newer office buildings in NYC compared to older assets which make up 80-90% of New York’s office inventory. Read more here.

Charts We are Talking About

The amount of institutionally sized office trades has not been this scarce since 2010, with only 29 trades over $100M in size this year. Within this data, only 25 of the transactions were pure-play office investments. Ten of these deals were priced at steep discounts to replacement cost and had some element of repositioning or lease-up plans underway. Another seven trades featured single-tenant net-lease profiles, with a few of the lease terms extending past 20 years. The debt market (or lack there of) is likely the biggest driver in determining what marketed deals transact as we progress towards 2024. Read more here on CoStar.

Feel free to share this newsletter. New subscribers can sign up HERE to be included on future Digest editions.

Questions? Thoughts? Want to connect? Please reach out to [email protected]