Where Do U.S. Property Values Go From Here?

Office Will Increasingly Bifurcate Class A Direct New Leases with 7+ Years of Term

"Old Assets"

"New Assets"

New Construction Premium (%, RHS)

The pandemic accelerated the flight to quality trend that was already well underway.

$80

10% 15% 20% 25% 30% 35% 40% 45% 50%

$70

New leasing is concentrated in the newest, highest quality Class A assets and rent premiums for this space have widened from pre COVID levels. Newer Class A assets are fetching rent premiums that exceed 30% from other Class A counterparts— a widening from the pre-pandemic premium of just under 20%. Conversely, weakness in office is concentrated: nationally, 15% of buildings contain 80% of the nation’s vacancy.

$60

$50

$40

$30

$20

$10

0% 5%

$0

2018-2019 Comps

2020-2022 Comps

Source: Cushman & Wakefield Research Note: Rent data are gross base rents.