U.S. Office Market Faces Uncertain Times Ahead, Yardi Matrix Reports

U.S. Office Market Faces Uncertain Times Ahead, Yardi Matrix Reports
March 31, 2020

SANTA BARBARA (MO.Properties) – February was the last month of the record long economic recovery before U.S. office workers were largely asked to work from home, which will likely have long term implications for the national office market, Yardi Matrix reports in this month’s National Office Report.

The rapid growth of COVID-19 has made it clear the economy has quickly shifted into contraction mode as the nation reacts to an unprecedented pandemic.

“This is a rapidly changing situation with no clear timeframe or conclusion, and as of now it’s unclear how long the shelter-in-place orders, social distancing and moratoriums on public gatherings will last or how deep the economic contraction may become,” states the report.

Market experts also suspect that the mandatory work from home restrictions may have long term implications for offices, perhaps changing how feasible and desirable workers view remote work, while potentially having more challenging implications for the coworking industry.

“Owners may be hesitant to lease space to coworking firms that are themselves dependent on short-term leases. Further, remote workers that had utilized cowork­ing space may find themselves making the home office a permanent one over the next couple of months,” states the report.

Office transactions will likely come to a halt for the time being despite record low interest rates and widening cap rate spreads. For the most part, the office market didn’t enter this situation overbuilt or with loans that are overleveraged. This should help activity resume once the crisis subsides.

Yardi Matrix offers the industry’s most comprehensive market intelligence tool for investment professionals, equity investors, lenders and property managers who underwrite and manage investments in commercial real estate. Yardi Matrix covers multifamily, student housing, industrial, office and self storage property types. Email matrix@yardi.com, call (480) 663-1149 or visit yardimatrix.com to learn more.

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