The office market has been on its back before. Past experience tells us the preconditions to recovery include a throttling back of the new supply pipeline and painful distress sales that provide necessary price signals.

‘Live-Work-Shop’ neighborhoods are providing a silver lining for the beleaguered office sector. Many prominent Live-Work-Shop neighborhoods are outperforming the broader market in which they reside.

Office-to-multifamily (OTM) conversions is a popular topic in the media, but rare, and unlikely to impact the bottom line of either sector.

Class A-, not Class B or C, office buildings comprise more than 70% (by sq. ft.) of office buildings with the greatest increase in vacant sq. ft. from Q1 2020 to Q2 2022.

The CBRE Econometric Advisors (EA) Taking Rent series leverages proprietary CBRE transaction data to model the spread between asking and taking rents across markets over time.

The virtual-work-induced shortfall in office demand is felt almost exclusively in non-prime buildings.

We expect a major increase in the retail availability rate which is forecasted to reach its peak in Q4 2021 at 12.5%, 386 bps higher than the pre-COVID level. We forecast that rents will fall and reach the bottom in Q1 2022.

We expected to see another surge of e-commerce from the holiday sales as brick and mortar stores face limited capacity, social distancing and consumers fearing indoor public spaces. However, brick and mortar spaces are still valuable in terms of providing omni-channel options for both retailers and consumers.

Despite recent improvement in monthly retail sales data, a resurgence of COVID-19 cases poses concerns about additional temporary closures for retailers in regional hot spots. In addition, we are witnessing high-profile bankruptcies almost on a weekly basis, along with announcements of store closures.

The availability rate increased from the previous quarter in 54 of EA’s 63 tracked markets (including the sum of markets). It remains unclear whether retail sales will continue to have a strong bounce back in the following quarters once the federal stimulus checks and unemployment benefits disappear.

The impact of COVID-19 has put additional pressure on the retail industry, which will continue. However, with retail sectors being impacted so differently, their recoveries will have different trajectory paths.

We are expecting a major increase in the availability rate due to the pandemic, which we forecast to reach its peak in Q1 2021 at 12.5%. Our expectations are that both availability rate and rent will take 3 years to stabilize.