CCP 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.

Here's a glimpse into what we are reading to shape our view on the evolving office market.

A JLL study shows that despite rising national vacancy averages for office, underperformance is extremely concentrated. 30% of existing office buildings comprise more than 90% of total vacancy, and most of these buildings driving vacancy are older vintage “commodity” assets. Read more here.

SL Green has agreed to sell a stake in 245 Park Avenue in New York City to Japan’s Mori Trust for a $2B valuation. The purchase price works out to a cap rate in the high 3s, a data point that’s sure to cause conversation as buyers and sellers try to work toward narrowing the bid-ask spread in office. Read more here.

JLL’s CEO, Christian Ulbrich, believes as employment in the US grows, office tenants that have declined their employee footprint will be increasing it again. Watch here.

Google’s chief people officer wrote an email to employees announcing an update to its hybrid work policy aiming to crack down on employees who are not in policy compliance. Aside from Google, within the past several months, corporate giants such as Farmers Insurance, Salesforce, Chipotle, Lyft, Disney, Snapchat, Blackrock and Meta have clamped down on and/or expanded in-office mandates to increase productivity, collaboration and innovation.

Data from the Bureau of Labor Statistics shows American worker productivity is declining at the fastest rate in 75 years, and productivity levels are significantly lower after the pandemic-related recession than from the three prior recession triggers. The most likely culprit? Remote work.