Where Momentum Is Building in U.S. Office

Where Momentum Is Building in U.S. Office

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Where Momentum Is Building in U.S. Office

While impacts from the pandemic have undoubtedly dragged on performance, there have been bright spots in the office sector that have remained somewhat under the radar.

While the U.S. office market has suffered almost continuous negative demand since 2019, U.S. trophy-grade office (top-tier properties that make up just under 6% of the overall office inventory) has continued to see positive demand (see chart below).

However, the trophy space is just a sliver of the overall office market. Recently, we have started to see positive net absorption for Class A office, as demand seeps into the next tier. Class A represents about 28% of the U.S. office stock.

U.S. Office Net Absorption

Sources: NCREIF and Hines Research. As of 2Q 2024. Note: Data is for properties held in the NCREIF

Property Index. (2) Returns are unlevered. Past performance does not guarantee future results.

Key Takeaway


Return to work is picking up as the supply of the most desirable office spaces (those that are higher quality, highly amenitized, and well located) remains limited. Given that, demand is broadening, and the potential to improve older spaces to meet evolving tenant needs is real.

Many office properties have maintained strong occupancy levels despite recent distress. These locations continue to build increasing demand momentum as companies evolve their in-person work models.

Learn why we believe demand will continue to spill over into well-located office assets.

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Disclaimer


The content herein and in the report is provided for informational purposes only. Nothing above or in the report constitutes investment, legal, or tax advice or recommendations. Such content should not be relied upon as a basis for making an investment decision and is not an offer of advisory services or an offer to invest in any product or asset class. It should not be assumed that any investment in an asset class described herein will be profitable. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice. Opinions or beliefs expressed in these materials may differ or be contrary to opinions expressed by others. Certain information above and in the report has been obtained from third-party sources. Hines has not independently verified such information.


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