Investors Finding Opportunities, Even Amid Uncertainty; Stabilizing Interest Rates Aid Climate

Buyer/seller expectations realign. Despite pandemic-induced uncertainty on the future of office space demand, transactions reached a record high in 2021 and only started to cool exiting 2022 amid capital market headwinds. By comparison, trades were fewer during 2023 due to reduced capital availability, but the prospect for 2024 interest rate cuts could help. Greater clarity can be found by examining specific segments of the market. Private buyers, in particular, will likely stay active as more hands-on investors capitalize on discounted prices and use creative strategies to add value. This trend is further distinguished among primary, secondary and tertiary markets. Tertiary metros have had a less dramatic pullback in investment as these areas sidestep many issues facing major metros, such as affordability challenges and difficult business environments. Meanwhile, primary markets have seen a more substantial slowdown, as they contend with these operational headwinds, higher entry costs and a greater reliance on institutional activity. As more activity in the $3 to $10 million price tranche in smaller markets supports price discovery, momentum in these areas will likely build.