Where are the opportunities in office investment, given the wide bifurcation between success and distress?

The office sector is facing more than its share of tough challenges in a new era of hybrid work that has altered basic supply and demand fundamentals.

The story of surplus office space creating a drag on the office sector appears pretty straightforward. Vacancies have increased as demand has decreased. The national office vacancy rate has climbed into the high teens, which will take years to absorb given the tepid demand and downsizing still under way. However, it’s tough to paint office with the same brush; certain geographic markets have been less affected, and strong assets are outperforming weaker peers.

The bifurcation in the market is not necessarily a sharply defined line drawn between newer class A versus older class B and class C buildings but rather a performance gap between modern versus commodity buildings. According to CBRE, buildings constructed since 2010 have consistently recorded positive net absorption leading up to and during the pandemic, while ol