Marcus & Millichap

Five Predictions for the Office Sector in 2018

January 11, 2018

At the end of 2017, the office sector continued to experience a slowdown. There was a 50 percent year-over-year decline in investment sales volume in November, though there was also a 4.1 percent year-over-year increase in pricing, according to a report from New York City-based research firm Real Capital Analytics (RCA). Some of the decline in activity may have been driven by the rising asset prices being out of sync with expectations for occupancy and rent increases going forward. Will these patterns continue into the New Year? NREI spoke with several industry insiders to get a sense of where this sector is heading in 2018...

...Suburban offices will rebound. “We see accelerating strength in the suburban market,” says Alan Pontius, senior vice president, national director of specialty divisions at real estate services firm Marcus & Millichap. Part of the underlying reason for the improvement in the suburban office segment is demographics: older millennials are beginning to move to walkable suburbs. For office assets in these markets to compete strongly, they have to address the walkability factor and offer more than just a large lot to park cars, which are becoming less relevant with the proliferation of services like Lyft and Uber, Pontius adds.

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