Big investors are buying up more commercial real estate

With the Centers for Disease Control and Prevention recently announced that vaccinated Americans will, in most cases, no longer need to wear masks or observe social distancing, hopes are high that workers will return to the office soon.

And that’s exactly what investors are betting on, which leads to prices on the commercial property market rising when they track down office buildings that have been empty for a long time in anticipation of demand.

“The CDC’s new guidance will send a strong message to all businesses and their employees that a full return to the office and other indoor spaces can be achieved safely and effectively,” said James Whelan, president of the New York Real Estate Board, in a Statement to the Wall Street Journal.

The Journal reported that pension funds and private equity firms have been busy, spending record sums on office buildings and hotels as well, as they anticipate more people will be traveling again in the near future. As a result, commercial property prices have risen an average of 7% since July.

Investors could also turn to commercial real estate due to inflation, some experts say. Inflation has become a growing problem, and some can offset that risk with commercial property on leases that include rent increases to keep up.

“People see it as being protected against inflation,” Eric Rosenthal, managing partner of the Machine Investment Group, a real estate investment firm, told the Wall Street Journal.

Investors are targeting some of the cities hardest hit by the economic crisis that caused the COVID-19 pandemic. In San Francisco, the amount of office space available for rent is now at a record high, CBRE data shows.

As the CDC updates its guidelines, some companies have chosen to shorten their return deadlines as well. Financial firms like JPMorgan Chase, Goldman Sachs and Blackstone have announced earlier returns to the office, and in some cases they even expect employees to be back to work as early as next month. Dallas-based travel technology company Saber Corp. announced that the upgrade guidelines will also speed up plans for the return to office and allow him to open more desks on each floor.

Eric Meyer, principal of Meyer Equities real estate investment company in New York, told The Real Deal that anything that makes people feel more comfortable when they return to work is a big plus for commercial landlords. “If the CDC says it’s safe and people are on the same page with it, it sure helps,” he said.

However, not all companies have shown themselves to be as enthusiastic. In a separate article, the Journal noted that many CEOs worried about a tight labor market have raised concerns that they may upset their workers by asking them to get back to work earlier than expected.