Urban office isn't dead—at least not if you look at leasing data. KBS reports that its strongest leasing activity has been in urban markets, including San Antonio, Dallas, Austin, Chicago and Washington DC.
"Despite predictions that urban office is suffering in the wake of the pandemic, some of the strongest leasing activity among KBS' properties is occurring in cities. This activity demonstrates that companies continue to have an appetite for ideally located, well-amenitized office space in urban markets across the country," Chuck Schreiber, CEO and co-founder of KBS, tells GlobeSt.com
Tech markets in particular are outperforming other office markets. According to data from JLL, tech companies leased 3.4 million square feet of office space in the second quarter; however, finance and insurance industries only leased 2.3 million square feet of office space. In addition, CBRE research shows "that tech companies were some of the most resilient throughout COVID-19 and are now preparing for high-paced growth, particularly in the San Francisco Bay Area, Seattle, Washington D.C., Los Angeles/Orange County, Detroit and Calgary," according to Schreiber.
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As a result, KBS has shifted its focus to technology-centric markets. "Tech tenants have taken a prominent position in the rent rolls of KBS properties throughout the nation. Currently, of the more than 18 million square feet of leased space in our portfolio, 41% comprise a variety of tech tenants," says Schreiber.
KBS is also following population trends. During the pandemic, people traded major metros for smaller cities in the Sunbelt region. "Of course, emerging secondary markets and suburban areas have been boosted by population migration patterns out of certain major urban regions," says Schreiber. "Our company also invests in some of these markets, including Raleigh, Salt Lake City, Charlotte and parts of South Florida, and we will continue to seek opportunities in markets that make sense for us."
Schreiber is seeing office growth not only in specific markets, but across the US. "Office growth and recovery are occurring all over the U.S. Half of the top 10 commercial office markets in the country are in Texas and Florida, with the rest widely scattered geographically," he says. "Some markets have been ahead of the curve in the office evolution. In fact, Dallas, where KBS owns several class-A properties, was one of the first markets to see office occupancy increase after the pandemic hit, largely because of its pro-business policies."
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Kelsi Maree Borland
