The rise in hybrid working has structurally affected the office demand outlook, in particular in secondary, non-CBD markets that saw take-up fall and vacancy rise. At the same time, low yields came under pressure from quickly rising interest rates, leading to significant value declines and drying up liquidity. As economic growth returns, supporting occupier market performance, and interest rates are cut in 2024, alleviating pressure on values, office investments are set to move back into focus beyond this year.
Looking at economic fundamentals, office productivity growth (the rise in office output per office worker) and office real rental growth have been closely linked in the past. When office productivity rises, the ability for office tenants to pay higher rents also increases (Exhibit 1) and landlords have usually been able to benefit.
With the interest rate outlook changing over the last quarter, forecasts for a pick up in office productivity growth over the next few years are gaining credibility as, among other factors, increased investment in a lower interest rate environment and the rising adoption of AI are forecasted to boost office productivity growth (Exhibit 1).
In conjunction with the constraints of prime office availability brought by ESG regulation across European markets, this means investing in office assets in CBD locations promises attractive income growth at potentially mispriced values for core investors.
This website is intended for COMMERCIAL BORROWERS located in Korea. Please set your preferences.
*Required Fields
Sorry based on your current selections, you cannot continue. Please update your selections or visit pgim.com/multi-asset-solutions for more information.
By continuing on to PGIM.com you are agreeing to the following:
For Institutional Investors only. All investments involve risk, including the possible loss of capital.
This website is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence.
PGIM is the principal asset management business of Prudential Financial, Inc. (PFI), and a trading name of PGIM, Inc. and its global subsidiaries. PGIM, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training.
In South Korea, information is issued by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean qualified institutional investors on a cross-border basis.
Prudential Financial, Inc. of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. PGIM, the PGIM logo and Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.
The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary.
© 2025 Prudential Financial, Inc. and its related entities.