The Corner Office V2 2023 12.20.23 - Flipbook - Page 4
THE ECONOMY
A LOOK AT MACRO ECONOMICS
Interest Rates, In昀氀ation, & Remote Work: What’s The Impact?
The commercial of昀椀ce sector, both nationally and in Charleston, is currently navigating
through a complex economic environment, characterized by high interest rates,
in昀氀ationary pressures, and the evolving dynamics of of昀椀ce work. Each of these factors
plays a pivotal role in shaping the landscape of of昀椀ce real estate today and in the
foreseeable future.
High Cost of Capital
The rising interest rates have signi昀椀cantly increased the cost of capital, leading
to a cautious approach from investors and tenants. This trend has resulted in a
substantial amount of capital remaining on the sidelines, as stakeholders await
a more favorable economic climate. The current high-interest environment has
tempered the pace of of昀椀ce investment sales, with buyers and sellers 昀椀nding it
challenging to agree on valuations in a market marked by uncertainty.
In昀氀ation & Construction Costs
In昀氀ation has had a noticeable impact on the cost of construction and tenant
improvements. The escalating prices of materials and labor have driven up the
costs associated with developing new of昀椀ce spaces and renovating existing ones.
This rise in expenditure is not only affecting the feasibility of new projects but also
in昀氀uencing tenant decisions regarding leases and space requirements.
The Remote Work Factor
The widespread adoption of remote and hybrid work models has fundamentally
altered the demand dynamics in the of昀椀ce sector. Businesses are re-evaluating their
space needs, leading to a shift in demand from traditional of昀椀ce setups to more
昀氀exible arrangements. This shift poses both challenges and opportunities for of昀椀ce
markets, as landlords and developers adapt to changing tenant preferences.
PAGE 4 | THE CORNER OFFICE | 2023 VOL. 2
