Brad Skidmore recently shared an optimistic view of the U.S. office market with Law360, despite concerns about ongoing economic challenges. He believes the office sector will continue to grow, particularly in high-demand markets, and that current trends are promising.

"Having been through two or three of the worst real estate cycles that we've seen, not just in modern times but I think historically in the U.S., I am very bullish, very favorable on commercial real estate in general, especially in the office sector," Skidmore said.

Skidmore highlights two key trends in office leasing: the "flight to quality," where companies are downsizing but seeking higher-quality spaces, and the contraction of some market players. He notes that these trends are interconnected, as larger companies downsizing due to economic issues often turn to reducing their workforce, the quickest way to save money. With employee headcount reductions, available space is increasing, creating opportunities for smaller tenants in high-quality offices that wouldn’t otherwise be available. He also sees ongoing interest in new developments in growing markets like Atlanta, Tampa, Houston, and Nashville, while markets such as Miami may experience slowdowns. Skidmore believes economic factors primarily drive growth, although the office space sector does not enjoy as significant an economic benefit as the manufacturing and industrial sectors.

Skidmore points out emerging trends in the office market, including the desire for early termination options in leases and reductions in free parking for tenants. He also notes a potential challenge for landlords and commercial office owners in leasing space to the government, particularly the federal government, as recent cutbacks could leave office buildings empty soon. While technology, especially AI, plays a significant role in office operations and amenities, he acknowledges challenges such as rising costs for tech infrastructure. Flexible office arrangements are still evolving, with some companies implementing hybrid work policies.

Financially, Skidmore anticipates strong transaction activity, expecting fewer distressed asset sales compared to previous downturns. He predicts a continuing upward trend in both the number of transactions and the total dollar value. He believes that if there is a sector of commercial real estate at risk, it is more likely to be retail rather than office space. He expects that data centers and industrial properties will continue to lead the market and does not foresee office properties losing ground to any other commercial property sector or class.

In summary, Skidmore remains cautiously optimistic about the future of the office market, particularly in high-demand locations, despite ongoing challenges in the broader real estate landscape.