The Office Space Market: Gary Ralston's Analysis

March 28, 2023   |   Office

Gary Ralston outlines how investors and buyers can take advantage of declining property prices and low occupancy rates within the office space sector.

As we continue to navigate through the unprecedented events in today’s commercial real estate industry, we have certainly experienced our fair share of turbulence. The frequent fluctuations in commercial properties for sale can pose various concerns for the unknowing investor. Amidst all the uncertainty, there is still cause for optimism. According to the Real Capital Analytics (RCA) index, commercial property prices have fallen substantially over the past few terms. While these results are not entirely unexpected given the current economic climate and the increasing mortgage rates, commercial property prices met a decrease of around 7% over the past year. However, it is important to note that the decline in prices has not been evenly distributed across all commercial property types. 

Office Space Vacancy

Office space was hit particularly hard as many businesses are adapting to the “work from home” model. Kastle Systems estimates that office occupancy levels have fallen by nearly 50% over the past week. While this may seem like a cause for concern, it presents a unique opportunity for both buyers and sellers.

                                                                                                                Source: MSCI

These numbers reflect notable declines in major cities such as Austin and Houston, Texas, where occupancy levels fell by over 10% and 6%, respectively. California cities also saw a significant decrease in office occupancy levels due to recent weather events. Despite these short-term fluctuations, there is still cause for optimism in the long-term outlook for the office space sector as the economy continues to recover and businesses return to more regular operations.

With occupancy rates so low, it is only natural to expect vacancy rates to increase and property values to decline in the short term. However, this also means that there are more opportunities for savvy investors and business owners to secure prime office space at a lower price point than ever before.

The Right Time to Invest

Recently, our firm had the pleasure of working with a client looking to sell their current office space asset. After sharing the RCA and Kastle data with them and discussing the current market trends, it was natural to suggest that the seller begin to seek out a deal sooner rather than later.

As a buyer, this is the perfect time to take advantage of the current market conditions and secure a prime office space at a great price. As a seller, there is still ample opportunity to make a deal that benefits both parties, particularly if you act quickly. It would be wise for commercial real estate affiliates to advise their clients on these updates as it will benefit all parties in the long run.

For those invested in the nation’s office space listings or other commercial properties for sale, there is still reason for optimism in the current market conditions. While office occupancy levels have fallen significantly, this presents a unique opportunity for buyers and sellers to benefit from lower prices and vacancy rates. As the economy recovers, we can expect to see a rebound in office occupancy levels and property values, making now the ideal time to invest in commercial real estate.

Clients should not miss out on this unique opportunity to invest in office space. With occupancy rates low and prices declining, investors can secure prime office space at a great price. Now is the time to act and take advantage of the current market conditions.

At SVN | Saunders Ralston Dantzler, our team of experienced commercial real estate advisors offers investment and consulting services for various industry affiliates. Contact us today to learn more about our services and how we can help you succeed in the current commercial real estate market.

Gary M. Ralston
Gary is an expert in all things commercial and he holds a strong passion for educating clients on market trends in the current and future economy. Earlier in his career, he guided a corporate real estate firm from less than $15 million in real estate assets to over $1.5 billion. Recognized as...