“It’s all supply and demand,” Martinek said. “That last couple of years, people don’t want to sell their properties. If my rate is under 3%. If I move, I don’t want to sell my property. I don’t want to buy it at 6.5%. And everyone’s in that boat. The little inventory that’s out there, people want it. If interest rates go down, I think you’re going to see more supply.”
More office space conversions
While Class A office space continues to be in demand, Martinek said Class B and C space continue to struggle.
“You have your Class A space that everyone’s chasing,” he said. “You still have your B and C office space that’s in the doldrums, that’s been in for years and years. We’re seeing some cities that are really doing badly office space-wise.”
One of the cities that Martinek noted has made a turnaround is New York City, as developers turn distressed commercial properties into residential spaces.
“New York is one of those that’s actually turned around pretty well,” Martinek said. “And I think a lot of it has to do with some conversions. Last I saw, I am aware of 10 million square feet that’s being converted from office to residential. New York City wants housing, and part of that will be affordable housing.”