A Tough Month for Office
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It’s not like anyone expected January office market stats to paint a particularly rosy picture. But the latest numbers from last month show a particularly wobbly start to 2024, with steep drops in asking rents nationally and lackluster leasing. Also for today: Some more bad news in the form of brokerage giant Cushman & Wakefield’s latest earnings report. Interested in learning about the leasing, sales and financing deals that are happening? Then sign up for Commercial Observer’s new Deals of the Week newsletter.
— Tom Acitelli, Deputy Editor
U.S. Office Market Slid Further in January, Delaying Recovery Hopes in 2024
Office real estate values and asking rents continued their incremental descent around the U.S. in January, forcing deep discounts and fewer transactions, and weakening market fundamentals. Higher interest rates and waning user demand has tightened its grip on the market. A new report from Yardi’s CommercialEdge shows the average U.S. office property value was down at least 25 percent year-over-year, with larger declines for older and poorly located buildings. Compared to 2022, things are much worse. “The lack of transactional volume makes comp identification more difficult, but lower-end buildings not in prime locations are suffering and we expect that trend to only accelerate,” Peter Kolaczynski, director at CommercialEdge, said in a statement.
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Cushman & Wakefield Reports Broad Revenue Losses in Q4 Earnings Call
If 2023 was a hard year for commercial real estate, then it was especially challenging for Cushman & Wakefield. The 106-year-old brokerage reported a 6 percent decline in annual revenue during its fourth-quarter 2023 earnings call Tuesday, citing double-digit annual declines in its leasing, capital markets and valuation businesses. While the firm's revenues tied to its leasing and valuation lines each declined annually by 12 percent, its capital markets business revenue declined by 41 percent in 2023. “People are hesitant to borrow and lend long due to the shape of the yield curve,” said CEO Michelle MacKay during the earnings call. “Once the Fed begins to cut rates, which seems likely later this year, we expect the yield curve to normalize.”
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