In select U.S. cities, prime office buildings are seeing near-pre-pandemic occupancy rates. Despite broader stagnation in the office building market, the demand for quality is pushing top-tier buildings to capture an outsized share of today’s tenants.
According to Julie Whelan, global head of occupier research at CBRE, “Our prediction is that within a few years, [trophy buildings] will essentially be out of space.”
That said, there are several nuances that make these investments less straightforward than they appear. We’re taking a closer look at the opportunities in the trophy office market, and how to negotiate them with the right real estate management solution.
Our View of the Trophy Office Market
In cities like Chicago, Boston, and Miami, modern towers with first-class amenities are tight on availability, despite citywide vacancies in less desirable buildings. Features like high-end design and enviable locations attract employees and justify higher rents for employers that can afford it.
According to CBRE, “Prime buildings are generally less exposed to vacancy pressures. This should help these properties avoid the downward pressure on net effective rents the office sector has faced since 2020.” Despite many large employers maintaining hybrid work schedules, leading to underutilized space one or two days of the workweek, trophy offices are generally filled on peak days.
Even in markets where new office tower development has paused due to high construction and financing costs, opportunities remain for smaller construction projects and building upgrades in prime office markets with potential for demand.
To take advantage of the trophy office market, GPs and investors will need to keep a close eye on which markets are prime for development and which are not. It’s important to note that national office use remains flat, with markets such as Austin, Seattle, and Phoenix having a prime vacancy rate above the market average, likely due to newly built prime buildings still leasing up.
This is where turnkey investment management software is crucial for targeting markets that can benefit from new builds or renovations primed for trophy-seeking tenants.
The Best Way to Manage Your Trophy Office Investment
While there is still a level of uncertainty, developers, investors, and owners who embrace modernization and innovation will be the primary drivers of success in the office building market. Larger companies are getting a handle on their space needs and making longer-term commitments, giving investors more confidence in the office market than we’ve seen since the start of the pandemic.
GPs can foster investor trust and drive transparency with an investment management platform built for real estate firms that allows stakeholders to stay informed every step of the way. Covercy’s investor portal offers secure document sharing and a dashboard for viewing transaction history and performance reports in real time.
Covercy is a unique investment management platform that helps GPs easily manage communication, simplify distribution payments, and forecast emerging market trends. Our software also seamlessly integrates with third-party banking features to process payments with a few clicks.
Covercy’s customizable dashboard and reporting simplify communication so GPs and LPs are always on the same page. With support for compliance and legal documentation, Covercy’s investor management tools and features handle details like rent and market updates for investors.
Find out more about how Covercy makes it easier to capture opportunities in today’s office market and book a demo today!