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Back-to-office Delays Should Not Adversely Affect Office REITs, Fitch Ratings Forecasts

Originally published on August 17, 2021, by Michael Tucker for Mortgage Bankers Association.

Fitch Ratings, New York, said long-term office leasing plans will not likely be affected even if U.S. corporations continue to delay their return-to-office plans.

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Medical Office Sector Becomes More Attractive to Investors: Marcus and Millichap

Originally published midyear 2021 by Marcus & Millichap.

Broader recovery fortifies a positive outlook. Resilient during the health crisis, the medical office segment is in a position of strength. Demographic trends and an anticipated boost in health services are positioned to foster long-term tenant demand that will bolster investor confidence in the sector. Shorter-term, the full-scale reopening of most states’ economies and widespread vaccination efforts have laid the foundation for a broad economic recovery that will fuel continued employment growth in the second half of this year. The expiration of enhanced unemployment benefits in September and many states’ plans to terminate the allowance prior to the deadline have the potential to motivate more individuals to obtain work. Furthermore, the reopening of schools this fall should further aid employers when filling open positions during the final third of the year. The resulting employment growth will raise the number of commercially insured households, lifting health spending and the number of medical visits. Together these factors will fuel health-related hiring and supplement demand for medical office space.

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Firms Rethink Plans to Shrink Office Portfolios as Employees Return to Work: CBRE

Originally published on June 16, 2021, by Michael Tucker for the Mortgage Bankers Association.

U.S. companies have scaled back their plans to make big cuts to their office portfolios and many now expect their offices to support “collaborative” work in person rather than remotely, said CBRE, Dallas.

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Office Vacancy Rates Expected to Keep Rising: Moody’s

Originally published by Michael Tucker on February 23, 2021, for Newslink.com

The office market has seen less deterioration during the pandemic recession than it did during the Great Recession, but it’s not out of the woods yet, reported Moody’s Analytics REIS, New York.

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New Supply of Office Buildings Adds to Vacancy Woes: Report

By Michael Tucker

Cushman & Wakefield, Chicago, reported the recession that began in March is still being felt in the U.S. office market.

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Nearly Half of Office Tenants Likely to Reduce Square Footage, BOMA Survey Reveals

By David Kitai

A study of the COVID-19 pandemic’s impact on commercial real estate, commissioned by the Building Owners and Managers Association International (BOMA), has found that office users face widespread economic challenges but many remain convinced that in-person workspaces are crucial to their operations. They noted, as well, that landlords and property managers have successfully adapted to new needs during the pandemic.

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Commercial Deals, Rent Relief Requests on the Rise: NAIOP

In NAIOP’s sixth monthly survey tracking the effects of the pandemic on the commercial real estate industry, respondents reported continued gradual improvement in deal activity, but also reported more tenants seeking rent relief, particularly in the office sector. 

The survey was completed by 203 NAIOP members between September 15 - 18, 2020. Respondents represent a range of professions, including developers, building owners, building managers, brokers, lenders and investors.

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Why Office Leases Are Getting Shorter And What That Means For Valuations

By Jon Banister

Tenant demand in the office market has been increasingly favoring shorter-term lease deals, a trend that complicates how much buildings are worth.

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Office Demand Expected to be Favorable as Workers, Businesses Seek Normality: JLL

Demand for office space is intrinsically linked to the economy; generally in a downturn, office demand drops off as employment levels fall and corporates move into cash preservation mode. The global pandemic has undoubtedly pushed us into a global recession and in the short term this will have a direct impact on office demand. However, in light of the success of wholescale working from home, the question is now being asked – over the longer term, will this be the catalyst for the end of the office? 

This is not the straightforward equation it is often portrayed as; increased working from home does not directly equal less demand for office space. There are a myriad of other factors which need to be looked at, including density, financial returns, productivity and technology. Before examining these factors, it is worth taking a step back to look at the function and purpose of the office from both the employer and employee perspective.

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Office Market Sector Expected to See Negative Absorption Rates Until Late 2021: NAIOP

By Scott Baltic

National economic upheaval and surging unemployment will push U.S. office market absorption into negative territory through the second quarter of next year. That’s according to the NAIOP Research Foundation’s Office Space Demand Forecast for the second quarter.

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Rise in Co-working Spaces May Make Next Recession Worse, Boston Fed Reports

By Ann Saphir

The rise in co-working spaces, like those offered by WeWork, may be a source of financial instability that could make the next U.S. recession worse by sparking a run on commercial real estate, Boston Federal Reserve Bank President Eric Rosengren said.

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Office Vacancy Steady in April, Rents Up Slightly: Yardi Matrix

By Michael Tucker

Despite steadily growing new office supply, robust absorption held the sector's vacancy rate steady at 13.7 percent in April, said Yardi Matrix, Santa Barbara, Calif.

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US Office Sector Steady During First Quarter, Bodes Well for New Construction: JLL

By Patricia Kirk

U.S. office market performance in the first quarter of 2019 showed resilience, with roughly 14 million sq. ft. of absorption and dropping vacancy, despite increasingly cautious economic sentiment, reports real estate services firm JLL.

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Industrial and Office Property Values On the Rise, Retail Headed Down, Survey Reveals

By Barbra Murray

The future still bodes well for the office and industrial sectors, according to the Royal Institution of Chartered Surveyors 2019 Q1 U.S. Commercial Property Monitor report. However, survey participants indicate that more downward movement is on tap for the retail sector.

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Cap Rates to Remain Steady Through June, Experts Predict

By Kerry Curry

With late 2018 jitters gone and investor optimism returning, the commercial real estate market should experience mostly steady cap rates through the first half of 2019, although there are particular market segments and geographies that could experience some bumps.

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Sentiment Wanes for Office Market Affected by Co-working and Telecommuting: Study

By David Bodamer

Although it has not been the star of this extended commercial real estate cycle, the office sector has delivered its fair share of strong performance and solid returns. Occupancy rates and rents rose, cap rates fell and development has been kept in check.

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Office Market Moving Toward Flex Space; New York City to See Biggest Gains: JLL

By Michael Gerrity

According to JLL's latest research, Flexing Their Muscles: Markets to Watch in 2019, the U.S. office market is poised to take on significantly more office flex space in the coming year.

"The world's top companies recognize there is no one-size-fits-all flexible approach, just like there's no one type of worker," said Doug Sharp, President, JLL Corporate Solutions, Americas. "Flexible space options allow workers and teams to select the right space to perform work each day in a location that will help realize their company's mission and their own ambitions. This is one of the reasons we see so much runway for flex space in U.S. office markets - it addresses several core needs for employers and employees alike."

Flexible space inventory (including coworking space, incubators and other short-term space options) has grown at an annual rate of 23 percent since 2010. In 2018, flexible space accounted for nearly two-thirds of the country's office market occupancy gains. JLL predicts it will comprise approximately a third of the market by 2030, compared to less than 5 percent today.

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Experts Say Co-working Space Won't Upend Office Sector or Threaten REITs

By John Egan

Some commercial real estate observers might be a little worked up about how office REITs might be affected by WeWork and its co-working brethren. Yet is that consternation really warranted?

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Technology Company Expansion Boosts New Office Markets: CBRE

By Michael Tucker

Technology companies from northern California, Seattle, Boston and New York are expanding into new markets, creating more office space demand and rent growth in beneficiary markets, reported CBRE, Los Angeles.

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Office REIT Sector Could See Significant Change, Transwestern Research Finds

By Patricia Kirk

A shakeup may be in store for the office REIT sector with firms likely to change hands as interest rates rise and investors—private equity funds, other REITs and foreign investors—seek opportunities for placing large amounts of available capital.

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