Price gaps in the skyline: the premium on quality office trades in the U.S.
- The price difference between top-tier office trades and overall office trades offers tremendous insight into the general investor sentiment toward the asset class.
- Historically, the gap between overall office pricing and the top quartile widens during instances of economic headwinds, which is also when many opportunistic acquisitions were made at highly suppressed valuations.
- Currently, pricing for the top quartile sits roughly 85% higher than overall office pricing, superseding the 80% delta recorded post-Great Recession in 2009. However, this gap has shown signs of narrowing in recent months as prices in both segments have risen over the same period.
- As many experts anticipate further interest rate cuts by the Fed, it will be important to monitor these pricing trends closely.