Office Market Parallels

Office Market Parallels

Nice to be back from a whirlwind trip in the US visiting 4 cities in 11 days. Nashville is a fun town and if you ever get the chance, go to Broadway and listen to the quality of the bands. The place is a zoo on the weekends but Mondays there is room to move and even get a seat to listen to your favourite genre of music. Its ALL there.

The TCN Worldwide Fall conference was an inspiring and energetic 2 days. A large contingent this year and a diverse group of independent real estate practitioners. No house views and politics, just raw, natural and independent CRE.

The US office market is different to the Australian office markets in so many ways. It’s much larger, more dynamic, and corrects itself on a regular basis. Some of the deals that happen there, would never happen here.

Still, at their core, both markets are navigating many of the same challenges. Here are some general observations from countless discussions.

• Hybrid is here to stay, and mandates are not as prevalent as some would make you believe. One mandate does not maketh a market.
• Rents vary across the country as they do here. But the striking difference is the contrast in rents between Prime (the best) and Tertiary (the rest). They are huge, unlike here. The Secondary tier (the best of the rest) is a dominant focus as the search for value continues.
• Vacancy is high in most markets however smaller city markets are not as affected.
• Sales activity is just like here, slow but improving. However, some of the drastic price reductions would never happen here.
• CRE decisions are taking much longer, as they are here. Capital is tight.
• Tenants are taking less space and as a result, real absorption remains subdued.
• Conversions of office buildings is still a major topic. What do you do with the stuff that simply won’t lease? But like here, it is difficult to make some numbers stack.