Could Offices Be Approaching Bubble Territory?

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Experts believe that portions of the commercial real estate market could be approaching bubble territory over the next few years. 

According to John Chang, Senior Vice President and Director of Research Services at Marcus & Millichap, investors should reconsider the three-to-five-year supply and demand outlook before taking up new assets.  

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For instance, while industrial assets are seeing revenues up by 11% and vacancies at a low of 4%, Chang says that investors are snatching these properties up due to a spike in demand driven by supply chain issues. However, new construction could end up outpacing demand. 

However, Chang says that the retail and office sectors are still at a safe distance from bubble territory.

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At the moment, prices for retail are up just 1.9% from pre-pandemic levels and urban offices have seen prices fall 2.5%.  

Suburban offices are a bit more aggressive with prices up by 11.5% and revenues down by 1% due to people migrating to the suburbs. 

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