Brave Ideas Is The “Office” Asset Class Still A Good Investment?
Quote from Guest: “Debt funds are happy to keep pushing this money, banks on the other hand, are looking at a changing profit margin that is affecting the way that they think about this.”
Summary: Franco Faraudo, co-founder and editor of Propmodo, a media brand that focuses on technology and innovation in commercial real estate and the built environment, joins Bold founder Caleb for Episode 9 of Season 8. In this episode Franco tells us how the current economic volatility will affect office real estate and how the increasing cost of capital may shake up the capital stack for “the office”.
You will hear why lenders may not have the same appetite for offices, how investor profiles may evolve and whether a valuation reset is imminent. Franco and Caleb discuss whether Space-as-a-Service could be the unsung hero for the office.
Connect with Franco on LinkedIn
Connect with Caleb on LinkedIn
If you have any questions or feedback on this episode, email podcast@workbold.co
Value Bombs:
I think rising interest rates are certainly going to have an impact, but I don't think that impact is going to be felt universally across the office real estate market - Franco
A lot of office owners and operators are already in a tough spot and adding fuel to that fire is the coming recession and the interest rates that might be dragging us there. So I think everyone is looking at this and everyone in the world is thinking about it - Franco
The robustness of the flexible space industry, in bad economic times, can be considered as our bumper - Franco
For a lot of companies going forward, if you have a flexible space in the same building as a company has their traditional lease space, that can give them a bit of peace of mind - Franco
There's not a lot of good data surrounding flex spaces which makes them less appealing for lenders - Franco
For your own social media and also for your business, if all you're doing is just shilling your expertise or your product, you're kind of doing social media wrong - Franco
Timestamps:
[6:21] Are rising interest rates going to negatively affect office real estate?
[6:58] Rising interest rates are one of the main issues facing the property industry today.
[8:18] Interest rates have been low for a long time, why are they causing an issue now?
[11:23] How the cost of debt impacts business plans in real estate.
[15:18] Is the capital out there capable of offsetting the cost of debt?
[16:52] The lenders appetite for loans in office buildings.
[19:57] How the capital stack of the real estate business is going to evolve.
[23:28] The effect of a long lease on the valuation of a building.
[26:15] Can the current financial climate benefit the office market?
Resources:
It Takes a Village to Create a Flexible Office, Propmodo 2021
What Will the Fed’s Response to Inflation do to the Office Market? Propmodo 2022
Is it Time to Rethink How Commercial Real Estate is Valued? Sam Gamble
Shoutouts:
About Franco Faraudo:
Franco Faraudo has an MBA in entrepreneurship and has worked with a wide spectrum of technology and real estate organisations on their branding and content strategy. He has worked in real estate as an agent, manager, and investor. He writes about the intersection between the physical and digital world and is Co-founder and Editor of Propmodo.
Connect with Franco on Twitter
Sponsors:
Headline Sponsor: TSK
TSK creates inspiring workplaces for some of the world’s biggest brands across the UK and Ireland. They've been working for 25 years to deliver the best employee experiences and the vision of their clients. Not only do they create great places to work, TSK share workplace content every week from the latest data to inspiring spaces they’ve designed and built. You can read their latest insights at www.tskgroup.co.uk or check out their LinkedIn and Instagram pages to become a follower, fan and friend.
TSK publish weekly thought leadership, research and content featuring their team, clients and partners about workplace, commercial interiors, hybrid working and how others have prospered from investing in workplace. You can check their latest publications and video content in the show notes by signing up to their weekly ‘work made better’ newsletter or visit tskgroup.co.uk.
Fortune Favours the Bold
Bold merges property management & Space-as-a-Service to help office customers grow faster and drive asset value. Bold is a real estate brand owned and operated by NewFlex (www.workbold.co)
Future Proof Your Portfolio with NewFlex
NewFlex delivers and manages a range of branded solutions for every type of building, in every type of location, for every type of occupier. Including the flexibility to develop your own brand. All enabled by flexible management contracts where we are invested in making money for you. (www.newflex.com)
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