T he delta variant has proven to be a major curveball for office tenants who opti- mistically planned for a post-Labor Day return to the office. While some companies have stayed the course and welcomed employees back to their cubicles, others have prolonged their work- from-home policies indefinitely. For now, a hybrid plan is keeping the office market in limbo. Investors and lenders remain hesitant on the asset class as a whole, so much so that office is the new alternative asset product. With capital flooding the market, lenders have flocked to COVID- 19-era darlings, industrial and multifamily, driv- ing competition up and yields way down. The year has been anything but slow on the financ- ing side and, as a result, insurance companies have invested billions of dollars into what is largely only industrial and multifamily mortgage. Now that we’re in the third quarter, several life insurance companies are looking to pivot their existing strategy and diversify their production by investing in some higher-yielding debt. The quest for higher yields is leading them back to office. For example, a recent loan opportunity on a 50% loan-to- value stabilized multifamily asset that typically is catnip for lend- ers saw several groups pass due to overproduction in low-yielding multifamily loans year to date. Many lenders found themselves at 80% of their year-to- date production in low-yield multi- family loans, and have to shift focus for the remainder of the year, chas- ing higher-yielding loans. On the flip side, albeit not the majority, we’ve seen select insur- ance company players get more INSIDE Back to work PAGE 11 Denver South launches an initiative to help employees return to office buildings Alex Riggs Principal, Essex Financial Group Office is the new alternative asset class for lenders September 2021 PAGE 14 PAGES 21-32 Market outlook Increasing construction costs and the delta variant may stall office momentum Industrial section As demand grows, community development plans keep industrial on the back burner Please see Page 18 Essex Financial Group sourced a permanent loan for the Wheeler Block Building at the height of the pandemic. Lenders were attracted to the diversified rent roll with smaller tenants. Blaire Butler Assistant vice president of loan production, Essex Financial Group AndreaMehlem Operations and marketing coordinator, Essex Financial Group