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- November 1, 2024: Vol. 36, Number 10

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Not back to the office: And common-sense expectations for a recalibration

by Stewart Rubin and Dakota Firenze

These are the times that try office markets’ souls. The “Sunshine Markets” are performing better and the Pacific Coast markets worse, but the desire to break from the tyranny of commutation has left the sector in a sort of purgatory. Of the major property types, the office sector continues to be the hardest hit, both in terms of value declines and operating performance.

Although remote work and the higher cost of capital are the two largest catalysts for the office sector crisis, there are other challenges as well, including environmental mandates, rising operational expenses, tenant improvements and capital expenditures, as well as the potential for a broader cyclical market downturn. The impact of these issues includes higher vacancy rates, flat-to-declining rent growth, shorter leases, lower tenant space requirements and a lease expiration wave.

The dearth of office demand has investors exploring the viability of converting certain office space to other uses o

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