The Corner Office V1 2023 FINAL - Flipbook - Page 2
INTRODUCTION
INTRODUCTION
Recent headlines on the office sector are a little unnerving. Unprecedented
vacancy, crumbling values, major downsizing, work-from-home debates, and
economic unease are all major themes. This leaves no question that office in 2023
is struggling. But to what depths will it sink? And are all markets feeling the effect
similarly?
Let’s take a look at a few unsettling facts that provide a bit of context:
•
10 straight months with Interest Rate hikes in 2022-2023, with two more
scheduled for the rest of this year.
•
Office values in Manhattan, Houston, and Philadelphia could plunge by 40% or
more by 2024.
•
Several corporate giants have moved to tougher enforcement of their returnto-office mandates, including Chipotle, Farmers Insurance, Lyft, Disney,
Snapchat, Meta and Amazon.
•
$44.6 billion of U.S. office loans come due by the end of 2024.
•
In May, the vacancy rate for offices reached a record high of 13%, surpassing
previous peaks during the Great Recession of 2007-2009.
•
National office rent growth for the past three years has hovered around 1%,
according to CoStar data. By comparison, the U.S. inflation rate averaged 4.7%
in 2021 and 8% in 2022.
•
CMBS special servicers of foreclosed properties are having a hard time getting
their money back. Recent distressed office sales have averaged $74/SF versus
the going market rate of $162/SF.
A decidedly gloomy outlook.
BUT DESPITE ALL OF THIS, Charleston looks just fine. For the past decade,
our tertiary market has a enjoyed unwavering population growth, more than 2x
the national average. This growth has been THE major reason why Charleston
has showed resiliency in the commercial real estate landscape. Office activity
is admirable and we haven’t shifted to panic mode (yet...). In the mean time,
investors and occupiers continue to keep Charleston on their shortlists, as people
continue to lay down roots at a record pace.
PAGE 2 | THE CORNER OFFICE | 2023 VOL. 1
