Office -- The Value-Oriented and Defensive Play

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.