Office sector continues to show signs of distress

The office sector is facing significant distress, according RSM’s latest Office Sector Outlook, driving investors to approach the sector with creativity and innovation.

“Office sector distress indicators have flooded the middle market, signaling that a historically stable asset class is headed toward an unfamiliar new normal,” said Matthew Riccio, a real estate senior analyst with RSM US LLP and one of the report’s authors, in an interview with IREI. “With hybrid work arrangements here to stay, office supply will continue to rise, with demand concentrated on a flight to quality.”

Riccio indicated that transaction volume will remain low as deals will become more difficult to structure, with hesitant market participants focused on interest rates. Creativity in financial structuring, redevelopment and repurposing will sha