Office Condo Market Cooling Off
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Office Condo Market Cooling Down
Summary
The office condo market is expected to slow down after several years of brisk activity, primarily due to rising interest rates.Article
A recent poll conducted by Grubb & Ellis and PNC Real Estate Finance, and reported by the Wall Street Journal, surveyed over 100 office appraisers, developers, and brokers. The results revealed that 54% believe the trend of office condominiums will decline as interest rates increase.
Businesses typically purchase office condos to avoid rental costs, allowing them greater control over their space and occupancy expenses. Recently, these properties have also become popular as investment opportunities. Phoenix leads this market with 189 office-condo properties and more than 100 under development. In contrast, Houston has only three such properties, despite its office sector being three times larger than Phoenix's.
Investors, including myself, who have ventured into office condo investments, have often struggled to find tenants for vacant spaces. With a vacancy rate between 15% and 20%, I decided to exit early?"a decision I do not regret.
The issue isn't the quality of the space, which is usually excellent, but rather that suitable tenants often prefer to purchase their own office condos. Many potential tenants are startups or small businesses that can only commit to short-term leases. These businesses will either succeed and buy their own space or shut down, leaving investors without tenants.
While office condos are appealing and well-built for owner-users, investors might find better opportunities in industrial or warehouse properties.
Best of luck,
Marty Olson
Fox Real Estate Group
mo@foxreg.com
Visit: www.mnspaceforlease.com | www.officespacemn.com | www.warehousespacemn.com
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