Two years after the start of the pandemic, the future of the office market continues to spur passionate debate.
Back in August 2020, we offered our take: that top-quality buildings in major urban centers with a “live, work, play” environment would fare much better than older office properties with high deferred capital expenditures or those in less desirable locations.1 In other words, demand would continue to be strong for the best quality office properties—and we have seen that trend play out.
Today, Green Street, a commercial real estate analytics firm, forecasts that office demand will decline approximately 15% due to flexible work.2 However, that forecast obscures the clear “flight to quality,” where the negative demand impact has skewed toward older, under-invested buildings—and strong demand has continued for high-quality space.
These office buildings can be new or recently renovated, and they tend to be filled with amenities and in gateway cities near transit hubs. For example, since the start of the pandemic, 84% of total leasing activity in midtown Manhattan has occurred in Class A or trophy assets, according to Cushman & Wakefield.3