Has the Office Sector Peaked?

Investor sentiment indicates that the office market may have reached its peak or that it will continue slow and steady growth, but will not experience a spike in leasing activity. Restrained office job growth is impacting investor strategies. For some risk-averse property investors, this is the point where they begin assuming a defensive position to protect and preserve the value of their holdings, rather than buying vacancy in hopes of rolling up to market rents.

More building owners are focusing on shoring up tenant lease renewals in high-construction markets where vacancies have plummeted and rents have substantially increased, such as San Francisco, New York City and Chicago.  In some cases, owners are again throwing in free rent and other concessions.

Tawan Davis, CEO of Steinbridge Group, a real estate investment firm that deploys capital for private families and foreign investors, predicts that pension funds will be the first to adopt a defensive position on acquisitions of higher-vacancy or value-added properties, followed by insurance companies.

Commercial Asset Advisors, LLC