Prices, uses, and (r)evolutionary change: the outlook for post-pandemic office investing

Abstract

PurposeThe authors take a historical perspective and compare office market performance metrics and CMBS loan delinquency rates over the past two years with previous downturns.Design/methodology/approachWhat will happen to the office sector in the post-pandemic era? we examine this question from three perspectives. First, the authors discuss the (short-term) risk of commercial real estate investment with high inflation and rising interest rates. If investors want to use CRE as an inflationary hedge, the cash flow must increase enough to counteract growing cap rates given rising interest rates.FindingsAs it turns out, the COVID-19 recession has been notably innocuous. Third, the authors focus on medical office space – an emerging investment option for the office sector.Practical implicationsThe authors remain somewhat positive (or at least less downbeat) about the future of the office market based on the data they reviewed.Originality/valueThe office market is experiencing an odyssey rather than an exodus, at least in the short run. However, the authors remain cautious and they are monitoring key signs, prepared for the possibility of (r)evolutionary change in the office sector.