The ‘Urban-Suburban’ Office May Be the Sector's Future

October 21, 2020

As the work-from-home trend maintains its momentum amid the pandemic, “urban-suburban” office buildings in walkable locations near retail and housing are faring better than purely urban or suburban offices, Forbes.com reports.

This urban-suburban blend is not new for the office sector, but the trend could accelerate in a remote-workforce world in which employees may want or need office environments that are closer to home than urban downtown locations.

Large institutional investors have mostly focused on major urban markets, such as New York City and San Francisco, because commercial rents tend to be higher in these locations. But middle-density, urban-suburban offices are starting to garner more attention, particularly in industries such as tech and finance that are looking for more options as they separate from their single urban destinations due to the growth of remote work.

Suburbs with thriving downtowns adjacent to cities may fare best in attracting these new urbanites both to work and live. Forbes.com points to areas such as Cherry Creek near Denver, downtown Chandler near Phoenix, St. Louis Park near Minneapolis, and Carmel near Indianapolis as examples of the suburban-urban blend with mixed-use environments.

“This doesn’t mean that it will be smooth sailing for suburban offices in the longer term, but the discrepancy in sublease inventory at least provides for less competitive shadow inventory,” Eliot Bencuya, co-founder of the real estate investing firms Streitwise and Tryperion Partners, writes in a column at Forbes.com.

The old suburban corporate campus, dominant in the 1980s, that stands apart from other buildings may struggle as properties nearer suburban cores thrive, Bencuya says.

“Investing in urban-suburban locations is an opportunity made clearer by new trends in office space use, geographic preferences, and already established mixed-use areas,” he writes. “These pockets offer an opportunity to create an acquisition pipeline of property. While it may take time to find properties, it will be worth waiting for the right opportunities to enter these markets for the long term.”