Offices haven't hit bottom, yet

Daily Data: But there are some slivers of hope

• Distressed Office sales are the most common sales

• checking in on vacancy and absorption rates

• the fabric of American life, forever changed (by longer distance living)

• not all construction is in the doldrums

---

👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. 

Office hasn’t hit bottom, yet

It’s the slow-moving trainwreck that everyone saw coming, but it’s still coming.

Office buildings continue to trade at substantial discounts:

>50% of Office Sales are Distressed

JLL

Distressed office sales are now more than 50% of total office sales.

Distressed is defined as a sales price (on per square foot basis) that’s lower than 80% of same-city office trades since 2010. So more than half of sales are falling into the sub-20th percentile of prices.

All those losses, and some big hitters think that (mostly smaller) banks are the next domino to fall sometime next year. Of course, anyone crying out for help would say “it’s not just us,” but we shall see.

It’s definitely true, though, that the underlying dynamics behind office continue to go the wrong way.

The story around office buildings is the directionally the same: there is less demand for the asset class, just as the cost of doing business got substantially higher. That’s generally not a favorable mix.

Whatever the excitement around Return to Office, the reality is that firms continue to cut back on their office space (in the aggregate, at least):¹

• Vacancy rates continue to rise: