The office sector has been making negative headlines lately, with concerns over debt maturity and a muted outlook for 2024. However, according to a recent brief from CBRE titled “There is Nuance to the Office Story,” there are stark differences between office asset classes that often get overlooked in the doom-and-gloom headlines.
One key difference is in asking rents versus economic rents. While landlords may be hesitant to lower asking rents, they are offering more generous incentive packages to attract tenants. On the other hand, economic rent – calculated by multiplying market occupancy by asking rent – is currently 14% above pre-pandemic levels and close to its peak in 2020.
Interestingly enough, Class A buildings have seen a decrease of 10% in economic rent since the pandemic began due to higher occupancy loss as companies trade up for higher-quality space. This highlights the importance of understanding these nuances within the office sector.
Source: CBRE
