Industry Voices Office

Back to Work

Jonathan Bennett, president of AmTrust RE, sees opportunity in an office sector permanently changed by COVID-19.


Whether reality or the inexactness of memory, the early days of the COVID-19 pandemic seemed to leave downtown areas in major metropolitan areas looking like the day after the apocalypse — no sign of the usual hustle and bustle, some newspapers blowing across sidewalks, and only a few cars puttering down the street. But now, two and a half years later, CBDs are back to life. Offices are in various stages of reopening, and tenants are welcoming back employees to a new work environment.

In trying to understand where the office sector in major cities is headed, Jonathan Bennett, president of AmTrust RE, a real estate owner-developer firm focused on primary markets, sees opportunity in an investment environment permanently changed by COVID-19. While some businesses have moved to hybrid or even fully remote work, Bennett sees inherent value in physical workspace. 

“We can’t deny that the pandemic changed the way people interact with the workplace,” he says. “But the reality is that there is a benefit to being in the office for many people. We’re seeing strong office leasing and occupancy data for cities like New York and Chicago as most companies plan their physical presence for the next decade. In fact, Google recently purchased a million square feet in the Loop in Chicago, which is further indicative of this.”

Considering the tumult in all major CRE sectors since the start of the pandemic, repricing shouldn’t be that surprising. As demand surged in industrial and warehouse properties, for example, assets increased in price while cap rates compressed. For office, Bennett says, repricing is certainly a concern — but perhaps not for the reason many expect.

“The bigger change in the market right now — bigger than COVID-19 — is interest rates,” he says. “With borrowing costs climbing, office buildings have been hit with a 15 to 20 percent reduction in price — it’s the climbing rates that are really affecting repricing of assets. 

“Beyond that, when determining the value of office properties, the same factors that influenced pricing for the past few decades are still at the top of the list — for example, building location, in-place leases, and weighted average lease terms, as well as tenant quality and credit.”

The bifurcation of the office sector has developed between Class A properties and Class B and C counterparts. With businesses needing to entice employees back into the office or to offer them amenities not available in home offices, developers and owners are making capital improvements with these specific goals in mind.

“Companies are mainly investing in physical aspects when refurbishing CBD office properties and are concentrating on hospitality-focused improvements in doing so — inviting lobbies, enhanced food and beverage options, fitness centers, etc.,” Bennett says. “The overall goal now is to make offices places that excite and invigorate employees and make them attractive enough to encourage the workforce to come in rather than staying at home.”

Deciding to invest in an office property can be a tricky decision. If a Class B property can’t be improved to the point of viability as a post-COVID-19 asset, the numbers might not square. But other assets that are in relatively good shape could be competitive with minor upgrades.

“At most properties, making the necessary renovations is not a physical challenge,” Bennett says. “Where things can get dicey is finding the right capital partner to bring on board. Some equity partners and lenders are hesitant to touch office space in outdated buildings with few or no amenities. Others, however, are willing to listen and take the time to understand the overall business plans and the building’s unique opportunity. Even if some capital partners are skeptical, developers who buy at a low basis have the opportunity to put together a very strong business plan, and I have little doubt there will be investors kicking themselves in five years for writing off office.”

Still, while challenges remain for the office sector, both in CBDs and suburban areas, Bennett believes the future is bright. 

“With complete and admitted bias, I think there is tremendous opportunity because of the downward pricing trend,” he says. “As noted, that factor is partially a consequence of the interest-rate shifts. But it’s also a natural consequence of the fact that fewer office buildings are near full occupancy.

“Properties with the potential to move up the food chain — whether B properties or formerly Class A assets that have aged but remain in great locations — present ambitious investors with the exciting, but I believe meetable, challenge of bringing them back to their glory. There will be investors who make a lot of money doing that this cycle.”

Nicholas Leider

Nicholas Leider is senior content editor for Commercial Investment Real Estate. Contact him at

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