Barbara Denham, Senior Economist with Moody’s Analytics Reis, appears in this episode to discuss office property market performance, future forecasts for office properties, and strategies for the commercial office real estate market.
Ms. Denham comments that the office market is “fine not hitting out of the ball park.” Net absorption was 6.8 million square feet, above that of the prior two quarters – abt of good news. This absorption was in line with new inventory of 7 million square feet, thus vacancy rates remained unchanged, as they have been now “for 6 to 8 quarters” at 16.8%, “healthy but not robust.” She notes that in the in prior expansion vacancy dropped to 10%, indicating something is different this time. What isn’t, right? There also is a bit of discussion of the WeWork debacle.
Rent growth was 2.6%, which, consistent with her not out of the ballpark characterization, she notes as “fine but just about the rate of inflation.” She discusses some of the reasons why this expansion may be different, concentrating on the characteristics of job growth in this expansion.
Ms. Denham sees cap rates as flat to rising a bit, noting that investors are cautious about rent growth projections in this office property asset class. she does not see rent growth increasing more that inflation, but is keeping an eye on aggregate and metro level job growth.