Respondents were also asked about the outlook for CBD office properties in comparison to suburban complexes. Responses were similar for both property types and also mirrored overall sentiment for the sector. In both cases, about three-fifths of respondents expect cap rates to increase (54 percent for CBD, 57 percent for suburban), while less than one-third expect cap rates to decrease (30 percent for CBD, 28 percent for suburban).
Respondents ranked CBD buildings as slightly more attractive than suburban properties (56 percent to 44 percent). That represented a slight shift from the fall when the two sub-sectors ranked essentially dead even (49 percent, CBD; 51 percent, suburban).
Sentiments did swing more dramatically when it came to projecting which type of investment offers higher long-term yields. In the current survey, CBD office buildings edged suburban properties by a wide margin (60 percent to 40 percent). In the fall, the numbers were quite different, with just 45 percent saying that CBD office buildings offered greater long-term yields compared to 55 percent for suburban assets.
“The office market in general will continue to remain strong as long as the economy and employment hold steady. Boston, Chicago, Los Angeles and New York City have had consistently increasing rental rates and decreasing vacancies,” says NAI Global President Jay Olshonsky.
Meanwhile, Moody’s reports cumulative appreciation of 15.2 percent for office buildings in CBDs and 6.1 percent for suburban office properties over the past 12 months.