News release

Value-add office is back in favor, up sharply from 2020 levels

Risk tolerance is growing among office investors, driving improved liquidity for value-add assets

November 18, 2021

Kristen Murphy

Investor PR, Capital Markets, Hotels, Property Management, Valuation Advisory, Agency Leasing
+1 617 848 1572

CHICAGO, Nov. 18, 2021 – Throughout the majority of the pandemic, office investors were widely driven by a flight-to-quality, as those assets offered the most resilience amid demand uncertainty. While core and core-plus office properties are still in favor, value-add liquidity is quickly recovering as clarity surrounding rent growth and the future of office demand improve.

While questions remain surrounding the impact of hybrid work on office demand, the majority of corporate occupiers have signaled that the office will remain the center of the work ecosystem. A physical office reinforces culture, drives collaboration and innovation, enables professional growth and brings a company’s best to its clients and employees. Hybrid work will have a durable presence but the net impact on space usage and footprints will be relatively minor. Leasing activity supports this thesis, nearly surpassing 40 million square feet. in Q3 2021 for the first time since the onset of the pandemic and bringing the trailing six-month transaction total almost 40% above the same time period in 2020.

“We’re seeing investors pivot back to previously out of favor sectors like office and hospitality that can produce very attractive yields,” said Coleman Benedict, Senior Managing Director and co-head of JLL’s National Office Practice. “As part of this rotation back to office, value-add is definitely back on investors radar reinforcing the investment community’s confidence in the long-term stability of the office market.”

During the pandemic, value-add office saw the most significant impact to liquidity due to demand uncertainty. As a result, the share of value-add office sales declined relative to historical averages. However, thus far in 2021, value-add is the most sought-after profile with the share of value-add office properties in the current pipeline recovered from declines in 2020, and, currently recovering towards the 2017-2019 levels. Additionally, value-add buyer pools are broadening after significant impact in 2020 and have seen the most improvement in 2021 relative to 2020. 

Some recent examples of value-add transactions that generated a significant amount of investor interest and higher than anticipated number of bids include, the recent $155 million sale of Mt. Eden Research Park in the Bay Area and the $56.5 million sale of CASA in Phoenix.

According to Senior Managing Director Rob Hielscher, JLL Capital Markets, “The amount of interest we received for Mt. Eden was truly astounding. A combination of value-add and life sciences drove pricing and the number of bids upward in a highly competitive process.”

The CASA office sale set a new price-per-square-foot record for Phoenix’s Piestewa Peak submarket. JLL Capital Markets’ Ben Geelan who led the sales efforts for CASA noted, “In the last few months, we’ve had strong investor demand for value-add office product and haven’t seen one deal price below our midrange valuations demonstrating the strength of the subtype.”

As we move through the end of 2021, all signs point to a continued rebound in the capital markets. Office will continue to gain momentum as investors look to deploy abundant dry powder. The office market offers favorable risk-adjusted returns and can provide a considerable yield premium versus sectors such as industrial and multi-family which have seen record cap rate compression.

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm's in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether investment sales and advisory, debt advisory, equity advisory or a recapitalization. The firm has more than 3,000 Capital Markets specialists worldwide with offices in nearly 50 countries.

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 95,000 as of September 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit