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CRE Investors See Upside to Co-Working Space, But CBRE Says, Only to a Point
While commercial real estate investors generally take a positive view on co-working, it is critical to maintain a balance of traditional and co-working space in a building in order to create long-term capital value. Based on CBRE’s 2018 Americas Investor Intentions Survey, investors say a co-working occupancy of a third of the space or less, with a qualified operator, supports a healthy capital value.
CBRE’s Chris Ludeman says, “Investor views continue to evolve with regard to whether co-working is accretive to asset value. Buildings that attract the best tenants command the highest rents and valuations, and there is evidence that a best-in-class co-working operator is seen as an amenity by investment grade tenants who continue to desire traditional lease terms.”
When it comes to the hottest markets, CBRE’s Spencer Levy notes Seattle is the only market he’s ever seen advance in status from a secondary market to a primary – though he admits others such as Austin, Denver and Nashville are close to repeating Seattle’s feat.
A big investment driver now is investors are flocking to find the next Seattle after 2017 experienced the lowest CRE investment returns since the financial crisis. NCREIF reported a 7% overall return, and the only sector to exceed its historic return average was industrial (13%). Levy says, set against that backdrop it is not surprising to find investors increasing their focus on higher-yield potential of high-growth secondary markets, and moving further out on the risk spectrum in search of more opportunistic equity deals.
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- ◦Sale/Acquisition
