In over 30 years of involvement in US real estate, I have never encountered a dilemma in institutional office investment similar to what we are experiencing today. About half of my peers at Barings, and around the industry, are expecting a decline in office demand as they envision WFH becomes the norm and businesses move to downsize their investment in pricey urban office space. The other half envision a RTO marked by the need to expand space per employee to allow for social distancing, dividing teams in the office, and between urban and suburban locations.  Writing from my home office (actually my breakfast room) outside of Chicago, with no commercial office within miles, our Chicago Barings office at Wacker Drive and Madison Avenue seems like a distant memory – and one I would like to get back to! 

During my years of institutional investing, office investment has held a special place in my heart since I am a former member of the Equity Office team. Sitting at the side of legendary investor Sam Zell, I learned firsthand of the importance of having an executable vision that would attract more than its fair share of office tenants, and negotiating a strong lease to create value for the owner. Today, good office leases and the strength of the underlying tenant businesses are helping all of us who own office buildings weather the short-term storm.  

But, how will those tenants behave in the mid- to long-term?  How will the demand change?  Will there be a shift in the demand among markets?  Since we are looking to forecast human behavior, the likely outcomes are wider than ever.