Institutional Investors Show Increased Interest in Suburban Office Assets
The possibility of higher levered returns is driving investor interest in class-A suburban office assets.
December 3, 2020 | Patricia Kirk | National Real Estate Investor
A demographic shift from urban to suburban life was already occurring prior to the COVID-19 pandemic, as millennials in their late 20s and early 30s were beginning to start families and move to the suburbs. As a result, employer and investor interest in suburban office assets was rising.
The pandemic, however, has accelerated that trend, according to San Francisco-based Al Pontius, senior vice president, real estate investment services, at brokerage firm Marcus & Millichap.
Office leasing continued to decline nationally in the third quarter, with renewals dominating leasing activity, according to Bruce Miller, a senior managing director in the capital markets group of real estate services firm JLL. He notes that suburban submarkets saw declines in leasing that were identical to office buildings in CBDs in the first and second quarters of the year, with new leasing activity in each quarter declining by 50 percent. In the third quarter, however, CBDs saw an 18 percent quarter-over-quarter decline in leasing activity, while leasing in suburban submarkets fell by a more modest 4 percent.
