Snapshots

Office tenants becoming buyers

March 19, 2024

Contributors:

An opportunistic sales market and the pullback of institutional capital has allowed users to grow their share of office acquisitions—more than doubling their share of the buyer pool compared to pre-pandemic averages.

Dislocated pricing enables corporate and public users to secure spaces for pricing levels competitive or at a discount to long-term leasing.

Since the beginning of 2023, corporate users have purchased $4.5 billion in office assets, while higher education and state and local governments have respectively acquired $1.9 billion and $1.5 billion.

While many corporate users are actively disposing of older suburban campuses with diminishing utility, others have taken advantage of pricing discounts to secure high-quality spaces at discounts to long-term leases, or positioning themselves for a favorable sale-leaseback exit in the future. Costar Group, Prada, Kaiser Permanente, FanDuel, Hyundai, Amazon, Fortinet, and Intuitive Sugical have all acquired offices priced above $100 million for occupancy since the beginning of 2023.

While office valuations and liquidity have been especially hampered by sharp rate hikes over the past two years, forward curves indicate that investors expect as many as three rate cuts by the end of the year, offering welcome relief to valuations and beginning to restore transaction activity.

Law firm leasing is exceeding pre-pandemic levels

Positive leasing momentum in recent quarters has driven gross U.S. office leasing activity to 75% of pre-pandemic levels.

Conversions are helping offset the rise in vacancy

Conversions are mitigating the rise in vacancy

Office demand continues steady path of recovery

Office requirements trending upwards for four consecutive quarters