Beyond the Flight to Quality: The Office Questions That Aren’t Being Asked

The conversation surrounding office real estate often gets stuck on the same-old, same-old: remote work mandates, flight-to-quality trends, and peak interest rates. But beneath those surface headlines, industry leaders are tracking shift-driving dynamics that haven’t yet hit the main stage.

Connect CRE reached out to top minds across brokerage, investment, debt placement, and research to ask a simple question: What is the one office question the market isn’t asking right now? From AI infrastructure and workplace friendships to property tax lag and cash-flow valuations, here is what they say should be on your radar.

BROKERAGE & ADVISORY

Is Your Building AI-Ready?

Jim Adler, Executive Vice President, NAI Hiffman

“Much of today’s conversation centers on the rapid advancement of artificial intelligence. But we may be overlooking a more immediate question for commercial real estate: Is my workplace AI-ready?

As companies evaluate office space in the years ahead, they may increasingly assess a building’s ‘AI score’ that will reflect two factors. First, whether a building can support a technology-enabled workforce, and second, whether it helps companies attract and retain the talent needed to develop and use AI.

For years, office owners have competed by adding better amenities. The next in-demand offering just might be called ‘AI-optimized.'”

The Shift in Geographic Footprints

Amanda Kross, Executive Managing Director, Financial Services Division, JLL

“At a macro level, AI is enabling companies to be increasingly selective about which roles belong in which talent hubs, rather than simply chasing talent to their existing locations.

Geopolitical shifts, supply chain realignment, and changing workforce dynamics are quietly causing companies to reassess their geographic footprint. But most of the office conversation hasn’t caught up to that yet.”

“Friendship Premium” at the Office

Anna Squires Levine, Global Head of Experience Services, CBRE

“Gallup research shows that having a best friend at work is the number one predictor of employee wellness and engagement. It’s not only what people are doing, it’s whom they’re doing it with. KPMG coined this the ‘20% friendship premium’ after they found that people would choose a role working with close friends even if it were compensated 20% below a role without close friendships.

I think companies and landlords should investigate what fosters friendship at work. They should invest in the conditions that prompt it, and nurture friendships amongst their employees and tenants.”

Is Class B Having a Quiet Moment?

Katy Redmond, Senior Managing Director, Leasing Advisory & Tech Vertical Co-Lead, JLL

“There’s a supply-demand imbalance for Class A and Trophy space in major markets, yet not every occupier fits that profile. One under-asked question is whether Class B is having a quiet moment.

Landlords and investors are retrofitting solid properties that, with the right deal structures and upgrades, can offer compelling value—including suburban-metro locations that actually work better for talent cost and access.”

INVESTMENT & ASSET MANAGEMENT

Neighborhood Over Amenities

Gordon Lamphere, Vice President, Van Vlissingen & Co.

“Everyone in commercial real estate loves talking about building amenities. But the greatest amenity an office building offers is the neighborhood it’s in.

Employees don’t commute for a ping-pong table. They commute for a community, a fun lunch spot, a safe walk to the train, and somewhere to grab a drink after work. You can pour millions into a spec suite program and a stunning lobby. Still, if the surrounding blocks offer no walkability, no food, and no sense of safety, you’re polishing an asset the market has already voted against.”

Market Sentiment vs. Asset Fundamentals

Michael Nathan, Managing Director & Chief Investment Officer, Harbor Group International

“Certain office markets in the U.S. are subject to ‘headline’ issues, where overarching factors have caused investors to avoid them. But opportunities can be found when office properties are evaluated to ascertain if the fundamentals outweigh sentiment.

These properties are often at reset basis levels, making both lending and equity compelling investment angles. Smart investors consider every aspect of a property and market before dismissing an opportunity.”

EQUITY & DEBT PLACEMENT

What Does an Office Deal Need to Get Financed Today?

Michael Lee, Partner, HKS Real Estate Advisors

“The question everyone has been asking is, ‘When will office values hit bottom?’ The better question is, ‘What does an office deal need to look like today to actually get financed?’

Today, the focus is less on pricing and more on the overall loan structure, including how much capital a lender is willing to provide, leverage, recourse requirements, repayment terms, and execution timelines. Ultimately, the office deals getting done today are the ones with the right fundamentals and a financing structure that aligns with lender expectations.”

Rate Spreads and Potential Upside

Wes Wallace, Senior Vice President, Debt & Equity Placement, Transwestern

“Could strained operations and compressed returns in other asset classes push more capital back into the office market sooner than people think?

Another question is whether the wider spread between cap rates and borrowing rates sets up the office market to navigate a potential ‘higher-for-longer’ rate environment more effectively than other asset classes.

Finally, with office space being such an important driver in recruiting and retaining top talent, is it possible there is even more upside in rents for top-of-market buildings and new development than is currently being underwritten by investors?”

PROFESSIONAL SERVICES

Who Will Fund the Next Generation of Reinvestment?

Spencer Kallick, Partner, Allen Matkins

“The question here is who will own and reinvest in the next generation of office buildings, and candidly, who will not.

There has been a huge flight to quality and a large reinvestment into Class A assets. The question becomes who will lead the charge on the next reinvestment and reinvention of office.”

The Property Tax Assessment Lag

Carey Heyman, Managing Principal of Industry, CLA

“One issue that stands out is the disconnect between current property values and municipal tax assessments. In many markets, assessed values continue to reflect conditions from an earlier point in the cycle, creating property tax liabilities that may not align with today’s market realities.

At the same time, many office properties are approaching refinancing events while facing higher borrowing costs and growing expectations for modern, move-in-ready space. In an environment where owners are evaluating every lever available to improve asset performance, property tax strategy deserves a much larger place in the conversation.”

RESEARCH & ANALYTICS

Pre-2019 Lease Expirations & Conversion Risks

Adam Siegel, Vice President of Product Growth, Crexi

“The one question I always pose is what happens to large leases in CBDs that were signed for 10-12 years pre-2019 and have yet to expire. When these rents roll over to today’s pricing, it will drastically affect values as NOIs that were being propped up suddenly reset. There is still a large amount of risk on the table, with lease-up time and TI costs being much different from what they were pre-Covid.

The secondary issue tied to that is whether these buildings can be converted to alternative uses. If vacancies in some of these buildings spike and an alternative use is not feasible, they really become dead weight.”

Pre-Capital NOI vs. Free Cash Flow Metrics

Daniel Vickerman, Senior Vice President, Investment Research, Heitman

“Given that we have just lived through a massive devaluation of the office sector, we have to ask ourselves whether we were, and are, valuing office correctly in the first place.

There has been plenty of writing about the high capital expenditures required for managing office space effectively, but lenders, appraisers, and investors all use pre-capital Net Operating Income (‘NOI’) as the basis for valuation inputs and risk measurement as opposed to more academically sound post-capital Free Cash Flow metrics.

Current convention obfuscates the capital drag inherent in the sector and could perpetuate continued overvaluation of office for both existing owners and new entrants, even for some sophisticated investors.”