Institutional Investors’ Retreat: Office Sector Red Line

Institutional investors have significantly reduced their involvement in the office property market, although alternative funding sources are stepping in to partially fill the void. According to a recent analysis by CoStar Group Inc., institutional investors’ proportion of office-purchase transactions among major asset classes plummeted from 44% in 2007 to 17% in 2023.

Meanwhile, institutional investors have increased their share of purchasing activity in other sectors such as industrial, which rose to 26% of their total activity in 2023, double its 2007 figure. Similarly, multifamily and retail sectors each accounted for approximately 25% of institutional investors’ activity.

As institutional players scale back their acquisitions of office properties, private capital and office occupiers are increasing their market presence. CoStar’s data reveals that private owners’ share of the office-buying market surged from about 55% in 2021 to over 60% in 2023. Moreover, companies acquiring office real estate nearly doubled their share from 12% in 2021 to approximately 23% by the close of 2023.

*Article courtesy of Costar

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