Office Outlook Special Report
An Office Sector Tipping Point: Climbing Vacancy and
Debt Maturities Raise Risks
What office operators can learn from retail. The office sector is in an undeniably challenging position. It is not, however, the first property type to face tech and behavior-driven threats. The rise of e-commerce in the 1990s and early 2000s had many questioning whether brick-and-mortar retail was becoming obsolete. These early fears were proven wrong as properties adapted to evolving demand. Offices face a similar challenge to their inherent relevance, as remote and hybrid work change space needs to varying degrees across industries and regions. Not the least of these dilemmas is financial pressure as debt obligations come due in a constrained lending environment. However, just like retail properties adapted to meet changes in the marketplace, so too will office. While returning pre-pandemic norms may be a long journey, some segments may recover quicker. Although fundamentals are likely to be strained for some time, especially in high-rise CBD assets, new space-use modalities may set the sector on a new path.