Today’s U.S. office market is a vastly different one than prior to the financial crisis. In the eight years that have passed since the start of the recession, the office market has undergone perhaps one of the greatest transformations since the suburban office market boom of the 1980s. The geographic center of gravity has shifted; demand drivers have changed; and the definition of “office space” has evolved. In particular, space densification — squeezing more workers into less space — has been cited as a heavy drag on office occupancy.
Several factors have contributed to space densification, some transitory and others more durable. Over-leasing during the housing boom likely saddled employers with a surfeit of space that was purged in the wake of the recession. Other structural trends, including the growth of creative industries, the entry of Millennials into the work force, and the proliferation of paper-saving technologies have also played a role. At a macro level, it appears that densification may be waning, offset by the competitive need for employers to provide working space that can both attract top talent and promote individual productivity. Yet at a micro level, these underlying trends continue to have important implications for investment strategy, including product, market, and asset selection.
Source : Deutsche Asset & Wealth Management