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Recent sales data suggests that office buildings with less than 30% of their total square footage occupied by flexible space providers sustain little to no loss in value. Of the $5 billion worth of 2019 office sales, 71% had a capitalization rate that was either 50 basis points above or below a baseline peer set (Figure 1). Micro-market real estate fundamentals appear to be the most important consideration for investors, regardless of the presence of flexible office space.
Figure 1: Cap Rate Spread vs. % of Flexible Office in Building
Source: CBRE Research, Real Capital Analytics, Q1 2020.
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