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BIG 204 - Change in the era

For a long time, office property has been a favorite in real estate portfolios. Generating stable, inflation-indexed cash flows, the asset class made it possible to deploy capital on a large scale, securely and with the conviction that continued capitalization rate compression would deliver attractive long-term returns. That was the world before...
 © Business Immo
© Business Immo
Business Immo
April 5, 2024 | 3:00 P.M.

Translated from French.

today's office space market, the sudden popularity of telecommuting and new organizational modes, inherited from the Covid-19 pandemic and the massive adoption of remote working technologies, have prompted companies consuming office space to review their real estate strategies. In France, where more than half of all companies allow their employees to work from home, usually for a day or two a week, the need for office space is bound to decrease. And all the signs point to a lasting paradigm shift rather than a passing fad...

Faced with these profound structural changes, and given that the asset class has been particularly hard hit over the past two years by the correction in valuations triggered by rising interest rates, many investors are now approaching the sector with caution, if not trepidation. However, those tempted to bury tertiary real estate for good may well regret it. For while the office sector is changing to adapt to new and sometimes uncertain realities, this change of era will not have caused it to lose all the advantages that made it famous in the first place.

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