Snapshots

Office renovations seeing increased success

February 13, 2024

Contributors:

While new construction has been resilient to the broader challenges facing the office market since 2020, new buildings are not the only segment of the market outperforming. As deliveries slow and lease up, occupancy gains are increasingly shifting to recently renovated assets. .

Buildings that have been fully renovated since 2015, irrespective of original building age, have seen consistent positive net absorption since the outset of the pandemic, but in the past 12 months, the share of occupancy gains taking place in fully renovated properties has more than tripled, and is beginning to exceed occupancy gains in new construction as availability in those assets begins to quickly decline.

While aging buildings have struggled during the pandemic, repositioned assets are demonstrating a path to success for these segments: buildings constructed in the 1970s through 2000s that have been renovated in the past decade have nearly the same levels of occupancy gain as new construction during the pandemic.

For well-located assets, a capital infusion can in some cases make the difference between obsolescence and trophy status: the Old Post Office in Chicago, a 1920s-vintage government building that was fully vacant within the past decade, underwent a major upgrade that completed in 2020, and despite delivering during the pandemic, is now 97% occupied at premium rental rates, and even attracted a Fortune 100 headquarters with Walgreens as one of its anchor tenants.

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