Office investments in most US geographic areas are in not in favor with commercial real estate investors due to many reasons, aptly summarized by the banner of a bygone presidential campaign, “It’s the economy, stupid!” As a result, transaction volume is mostly limited to Class A assets in core metro areas. 

A cyclical downturn in commercial real estate enables a fundamental value investor to acquire assets at sensible valuations. The hard economic times are exposing those owners who overpaid for assets, lack the acumen to adequately manage the asset, and are in financial trouble. Many lack the capital to fund the requisite tenant improvements and brokerage fees to increase occupancies.

Even cautiously minded real estate investors generally agree that global-friendly urban regions will see increasing employment growth over the next five years. Global GDP is expected to more than triple by 2030. US businesses will position themselves accordingly for increased global trade.

Being aggressive with an early move on the office asset class, but paying very low valuations, creates a solid defensive play for the days forthcoming when inflation and cap rates are increasing. Your rental rate projections should start at levels below the already decimated rental rates of any given market. Your competitive cost basis in the asset will enable you to capture market share and gradually eliminate vacancies.

If you reasonably can project a high cash-on-cash return beyond year three, then you will have an asset that is a great dividend play and maintain original value if cap rates increase. Office assets, correctly priced, can provide the growth and valuation margins necessary for the upcoming decade.