Hessam Nadji: Office Investors Still Scouting Opportunities
However, tenants and owners alike are “still trying to figure out what happens” beyond the next six months, and most are expecting less demand in the short term.
Commercial real estate investors are still interested in the office asset class in this low-interest rate environment.
“The investment market is looking beyond this current cloud,” Marcus & Millichap CEO Hessam Nadji told CNBC’s ‘Squawk on the Street’.
The industry is aggressively scouting investment opportunities, he says, as more than $5 trillion in excess capital will eventually get released into the market.
“Even buyers of office space—they’re not out of the market,” according to Nadji. “They’re in the market, taking advantage of low interest rates way ahead of the recovery in every property type.”
Nadji told CNBC that tenants and owners alike are “still trying to figure out what happens” beyond the next six months, and that most are expecting less demand in the short term. But as the economy recovers and new business formation picks up, Marcus & Millichap foresees a new expansion of space demand: “There should be an offset behind the current delay”, he said.
Boston, Austin, Nashville continue to stand out as cities posting the strongest office demand, while New York City, Washington DC and Chicago are among the weakest metros. But Nadji says much of these differences—which he says are actually quite small in most cases—depend on factors like the size of the metro’s central business district, the amount of public transportation, and the nature of the office-using jobs.
“We’re seen a lot of improvement in New York and in other lagging markets…it’s just that they had a bigger problem to solve because the pandemic had a larger impact on a bigger market,” Nadji said.
Going forward, he predicts everyone—whether employers or employees—will want plenty of in-office time for collaboration and team interaction. The need for collaborative space is already overshadowing demand for individual offices and cubicles, so the use of space is being re-envisioned.
On top of that, “the hybrid notion is a lasting strategy,” he said. That spells a return closer into CBDs: “If you’re coming into the office three days a week, you’re going to need to be fairly close,” Nadji told CNBC.