Offices will remain an important part of business culture and the economy, as well as investor portfolios, according to Principal.
Office fundamentals remain in a state of correction, particularly in gateway markets, although there are signs of nascent improvement as both leasing and deal activity have picked up in recent months. Still, these markets remain weak, and landlords are dealing with vacancy rates that are now well above the equilibrium levels required for meaningful rental growth.
The pandemic has been particularly severe on larger coastal gateway markets, such as San Francisco, Manhattan and Seattle, as their density and reliance on public transportation has made it more difficult to facilitate a return for office workers. Evidence of this is seen in elevated sublease vacancy rates, which have risen above the prior highs experienced following the 2001 tech crash. Most notably, larger global gateway cities and regions have generally experienced more active s
