Demand for office space is minimal as leasing remains soft and net demand is negative, according to Principal Real Estate Investors in its bi-annual sector report.
Capital demand remains bifurcated and remains focused on quality as physical occupancy is minimal. Sublease space remains problematic in the largest markets, and REITs are trading at a 10 percent to 20 percent discount as further occupancy and rent erosion is anticipated. Though private debt has remained conservative, delinquency rates remain low. The CMBS market remains tilted toward office exposure although investors have cooled; conservative underwriting, solid NOI and portfolio diversity has helped balance the sector.
To read the full report, click here.
