Shorter Leases are Adding a Wrinkle to Underwriting Office Investments

There remain ongoing debates in the office market on whether the pandemic-driven shift to work-from-home strategies will drive long-term structural changes. Will office tenants require more or less space? Will there be an outmigration from urban centers? How much will the glut of sublease space affect rents?

Even with vaccinations now taking place and a "new normal" potentially only months away, many agree that it is too soon to tell. That uncertainty is manifesting in many tenants opting for shorter-term lease commitments, which is creating underwriting challenges for both investors and lenders.

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