CREJ

Page 8 — Office & Industrial Quarterly — December 2020 www.crej.com OFFICE — MARKET UPDATE S uburban office investment sales for product built before 2000 between 10,000 and 200,000 square feet has slumped significantly as com- pared to the same six-month period last year. March through September, investment sales of this product type are down significantly for obvi- ous reasons and there are ways that we can create improvement in this market in 2021. Pandemic control as well as monetary, fiscal and tax policy will all be important levers to improve the market for these prod- ucts. My focus in this article is on older vintage (pre-2000) suburban mul- titenant office buildings over 10,000 sf. As expected, we have seen a sharp slump in sales velocity, as well as deal size in the second and third quarters compared to the same two quarters of 2019. My CoStar research shows sales volumes of these buildings down to 19 transac- tions from 41 last year, and median sale price is less than half. It’s tak- ing longer for these sales to be completed as well; 274 days instead of 235. I attribute this slowdown to be largely the result of the coronavirus pandemic the world has been expe- riencing. Interestingly, the stock market has shaken off many of the reduced valuations since March, and the suburban Denver office investment market held up in terms of valuations as shown by flat cap rates and even increased prices per sf from last spring/summer to this spring/summer. But the chilling effect on sales volumes and deal sizes is significant. The key to market improvement next year as we all know obviously will be to get our arms around the pandemic, as well as have an active monetary and fiscal policy blend to support our economy until we see improvements in global health. The Federal Reserve’s swift action to reduce the target range for the federal funds rate down to zero in March helped stimulate the econ- omy via its monetary policy, but it’s the fiscal policy (government spending) initiatives that have had the stronger effect in supporting the economy from a potentially significant recession. It is entirely appropriate for the government to rely on fiscal policy support dur- ing a global health crisis, especially when states are largely subject to balanced budgets requirements. We do have a ballooning deficit, but our budget deficit is only 25% of gross domestic product, as compared to other countries like Japan, which has a deficit of 100% of GDP. A fis- cal policy initiative in the form of another round of stimulus funding will be important to boost us out of a potential double-dip recession, which has slowed suburban Denver office building sales. Another important factor for the improvement of suburban office sales is an avoidance of president- elect Biden’s proposed tax plan. The How to combat the suburban investment slump ...and much more! CAM Services is Proud to Offer the Following Quality Services Multiple Service Discounts Available Power Sweeping Parking Lot Sweeping Snow Removal Day Porter Services Tenant Finish/Improvements Interior/Exterior Building Maintenance Power Washing Power Scrubbing Fence Repair Stormwater & Erosion Control Signage Repair Curb & Sidewalk Repair Parking Blocks Construction Clean-up Water Damage Clean-up Property Security Temporary Fencing Barricades Rubber Removal Airport Services Event Services Silt Fence Fully Bonded Phone: 303.295.2424 • Fax: 303.295.2436 www.camcolorado.com 24 Hours/Day, 7 Days/Week State-of-the-art equipment, with GPS tracking for your convenience John Becker Senior vice president, Fuller Real Estate, jbecker@fullerre. com Please see J. Becker, Page 17 CoStar Sales volumes for buildings built before 2000 was down to 19 transactions from 41 last year, and median sale price is less than half.