New high prices paid for some office buildings is making people scratch their heads. The difference from a 75% occupancy and a 93% occupancy in buildings in Chicago was from $100 a square foot to $500 a square foot.
It seems that in the never ending search for new investment returns, they are looking at office buildings with high level of quality occupancy as it was a bond in a completely separate light from any other building. Comparing to the current price of bonds and treasuries, it seems to be an appealing investment.
This is an interesting twist. All the sudden, prices in real state have dramatically changed for property that is best to next to best. This causes a whole new array of issues. Level of occupancy or quality of is not a measure openly disclosed unless someone is actually buying. This will make it harder for someone to analyze markets that are not familiar with. This is maybe one of the best opportunities to actually value an intangible like a Brand like a daily index tick.
If it becomes a long term trend, it would be interesting to see "bond" prices decreasing on increasing depending on minor occupancy rates changes.
At the end, in markets with so much bad news across the board, it is just the need (maybe the experiment) of decisions based on more accurate data.
It feels like finally the application of deeper analytics across the board. By refining and re-defining segments, REITs might be looking deeper for correlations. It is an exciting change in an uncertain world from the usual location, location, location.
