How to Invest in Office Real Estate

Investing in office real estate is one way you can put your  money to “work” (pun intended) for you. As with any investment,  investing in this type of property requires a little bit of know how before going chips in. Consider these 4 questions when evaluating office property. 

1) What method works best for you? 

There are a few avenues you can take to get into the office real estate market:

  • Cough Up The Cash. If you have the means to do so, you can go out and buy a physical office building and collect rent from the tenants. This is the most obvious way to do but not everyone has millions of dollars to do so.
  • Buy in Bulk You can invest in office buildings through a real estate investment trust (REIT) that specializes in office properties. How does a REIT work? They take money from investors to buy a portfolio of properties but you don’t always know what the properties are or where they are located. Many REITs are publicly traded so shares can be bought and sold on the stock exchange.
  • Crowdfunding (like addy!). Instead of putting all of your eggs in one basket or letting someone else make the buying decisions for you, you can pool your money with other investors to buy a property that you love. And the other best part? You often have the same financial goal.

2) What is the economic outlook for the area? 

Unlike other property types commercial properties are pretty closely tied to the fortune of local and even national economies. When the local market is booming, companies expand and need more office space. When the market declines (a la COVID-19), office space often follows.  If you’re buying the property during a downturn there may potential for big upside when (and if) the economy recovers.

3) What type of property do you want to invest in?

As you dig into the economic outlook for a market you will get a feel for what industries and businesses are experiencing growth. Based on this, you will be able to choose to invest in one of three property classes, each with a different level of risk and return.

  • Class A. These are newer properties equipped with top amenities built for high-income earning tenants (law firms, banks, technology companies) who can afford to pay a premium price and often have low vacancy rates. They are usually located in downtown areas. 
  • Class B.  Usually located in the suburbs and older than class A properties. These buildings are usually well-maintained and many investors see these as “value-add” investment opportunities because the properties can be upgraded through renovations and improvements to common areas. Buyers are generally able to acquire these properties at a higher CAP Rate than a comparable Class A property because these properties are viewed as riskier.
  • Class C. These properties are generally in need of renovation, such as updating the building infrastructure to bring it up-to-date. As a result, Class C buildings are aimed at tenants who are seeking lower rental rates. 

4) Who are the tenants?

The business world is changing and has dramatically changed in the short-term as a result of COVID-19. Some businesses are downsizing their office space and some are getting rid of it entirely as they leverage technology to enable remote work. Take a close look at the tenants and ask yourself if their business model is viable or if it is going to be obsolete in the coming future.

There’s a lot to consider when investing in office real estate and we know it can be overwhelming for newbies. If you invest alongside addy we’ll take care of all of these details so that you can just pick the property and let your money go to work 😉

Let’s Invest In Office Space Together:


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