Every quarter we get more insight into the actions of office using tenants post-Covid, and this quarter was no different. We continue to see evidence in our portfolio and across markets that while tenants are able to right-size their space requirements, they are still quite keen on providing a well-amenitized, nicely furnished, collaborative space for employees to use under any such hybrid work model they ultimately embrace.
Full remote is certainly a solution for some, but by and large it is not the only solution, and the beneficiaries will be owners that can deliver a unique office product in walkable locations.
From a supply-demand perspective, office development has nearly ground to a halt save for construction projects launched pre-Covid. And new construction is getting more expensive seemingly by the week. While headlines focus on office demand headwinds, they bely the future tailwinds supported by the lack of new, Class A inventory, especially as demand is weighted heavily toward quality product and away from boring, cube-farm commodity office.
Further, our emphasis on suburban office investing appears to be paying off as new data from Real Capital Analytics shows suburban office year-over-year price growth of 14.8%, compared to urban core price decline of 3.7%.
Portfolio Performance
We are currently 97% occupied and with no tenant delinquencies. Some large tenants have pushed back their full return to work plans, but that has not stopped us from executing new leases and engaging in renewal conversations with existing tenants.
In fact, we have some indications that now is an ideal time to blend and extend some tenants given that renovating space while employees are working from home is less disruptive than waiting until closer to the end of a lease term. We have executed a handful of new and renewal deals within the last month but will wait to provide a more detailed update in that regard while we work through some additional leasing.
As a reminder, there will be fewer leasing updates at the Allied Solutions building for the foreseeable future given that we are 100% leased there. We should have some positive leasing updates to share at Streitwise Plaza in Sunset Hills, even though we currently stand at 96% leased.
The pipeline for new acquisitions has perked up slightly as larger office owners begin to become “forced” sellers with mandates shifting to other asset classes. This may provide a potential runway to acquire some trophy assets in very strong markets, some of which we passed on acquiring in the last couple years because of pricing concerns. We look forward to our patience being rewarded.
Streitwise Product Updates
As you are no doubt aware, our strength is in real estate investing and operations and less so in technology. That said, we were able to expand our relationship with our escrow agent to be able to accept investments in Bitcoin and Ethereum.
Furthermore, we have a new Streitwise app available for iOS in the Apple App Store, where you can more easily check your portfolio as a mobile user.
Mr. Wills is the Marketing Director and Head of Product for Streitwise.
Prior to joining Streitwise, Mr. Wills was Head of Paid Media at Bitcoin IRA and Fortress Gold Group. Previously, Mr. Wills was the Director of Lead Generation at GTMA, a real estate marketing agency, where he founded the paid media department that oversaw a large nationwide portfolio of multifamily properties. Mr. Wills holds a Bachelor of Science degree in Marketing from the University of Florida.