Single-tenant office properties are serving as a flight-to-safety for institutional office investors. A webinar from Green Street tracked the post-COVID deal flow highlighted the trend. Institutional capital is attracted to the stable income and long-term tenancy of single-tenant properties as a hedge against downside risk, and they are willing to pay big for properties that fit the bill.

Richard Quinn, managing editor of Commercial Mortgage Alert & Real Estate Alert News called the HQ at First transaction in San Jose the "poster child" for the trend. KKR purchased the property from Monterey Trust for $535 million, a record at the time. Interestingly, Monterey Trust purchased the property pre-pandemic in 2019 for $429 million, showing that the asset continued to appreciate through the pandemic, despite the destabilization in the office market.

"This shows where people want to be," said Quinn in the webinar. "In hot markets, these are the deals that are trading. The price differential is not only above where we might have been during the trough of the pandemic, but there is such a turnaround from the price valuation in 2019. You are really seeing where the money is gravitating. This is telling you where institutional money is starting to look."