Office Condos Growing; Future Deemed Uncertain

The office condominium market has been revived by low interest rates and the financial benefits of owning versus renting, but the jury is still out on the future of office condos, according to a report by Grubb & Ellis Co. and PNC Real Estate Finance.The report found that office condo developers are active in smaller markets where they might not be expected, such as Grand Rapids, Mich., and nearly absent in certain larger markets, such as Los Angeles, San Francisco, and Boston. More than 60% of the brokers surveyed said they believed controlling occupancy costs is a major factor driving demand for office condos, which were defined as office buildings with two or more suites that are individually owned. But nearly 60% also gave future development only a yellow light, versus over 30% who gave it a green light. "If one assumes that there has been a fundamental shift in the way that real estate is perceived as an investment, then office condos are likely here to stay, remaining a legitimate, if tiny, segment of the office market," said Elizabeth Ptacek, a senior analyst in market research at PNC RE Finance and a co-author of the report, "Office Condos: Here to Stay or Gone Tomorrow?" The other co-author is Robert Bach, national director of market analysis for Grubb & Ellis. The companies can be found online at http://www.grubb-ellis.com and http://www.pncrealestatefinance.com.