In this episode, we cover misconceptions surrounding office real estate, current market trends, and potential investment in office buildings. From the challenges of converting office spaces to residential units to why now might be the perfect time to invest, Juan Huizar and Sheva Hosseinzadeh share their insights and expertise. Whether you’re an investor or just curious about the future of office space, this episode is packed with valuable information.
Is Office Space Really Dead?
The perception of office space has shifted dramatically since the pandemic. Many believe the demand for office buildings has plummeted as remote work becomes the norm. Sales are down, cap rates are up, and values have taken a hit. However, Shiva argues this narrative doesn’t tell the full story.
“I go to the office every day, and I know a lot of people who do,” Shiva shared. “Office has changed, but it’s not dead. People still need office space, just in different ways.”
Rather than large, private offices, companies are leaning toward shared, open spaces and downsizing their footprints. This evolution in office design reflects how businesses are adapting to hybrid work models.
The Challenges of Converting Office to Residential
Many suggest converting underutilized office buildings into residential properties to solve both office vacancies and housing shortages. But as Shiva pointed out, this is far from simple.
“Changing the use of a building requires navigating zoning laws, obtaining entitlements, and overcoming significant logistical hurdles,” Shiva explained. These complexities often deter investors from pursuing such projects, leaving many office buildings stuck in limbo.
Why Now Could Be the Perfect Time to Invest
Despite the doom-and-gloom outlook, Juan and Shiva see opportunities. Office space prices have dropped significantly, with some buildings selling at nearly half their pre-pandemic values. Additionally, new office construction has virtually ceased, creating a scenario where the existing inventory could become more valuable over time.
“When the market shifts and people want to go back to the office, there’s going to be less availability,” Shiva noted. “This will drive up demand—and with it, property values.”
For investors willing to navigate the current challenges, the returns could be substantial. With cap rates rising to 8-10%, the potential for strong cash flow is higher than it has been in years. However, financing remains a hurdle. Traditional lenders have largely exited the office market, meaning cash or seller financing is often required.
The Bigger Picture: Challenges in Downtown Long Beach
Downtown Long Beach, like many urban centers, is grappling with high office vacancy rates—nearly 30%. The pandemic’s impact, combined with an unhoused population crisis, has deterred businesses and tenants from staying in the area. Restaurants and other local businesses that once thrived on office foot traffic have also been forced to close.
But Shiva remains optimistic: “The city is taking steps to address these issues, and while change won’t happen overnight, progress is being made.”
What’s Next for Office Space?
Juan closed the episode with a contrarian view: “While everyone else is saying, ‘Get out of office,’ I’m thinking this is the time to get in.” He believes office demand will rebound as businesses and employees grow tired of remote work. Shiva echoed this sentiment, urging listeners to invest when the time feels right rather than waiting for the perfect market conditions.
Key Takeaways for Investors
- Office Space Isn’t Dead – Demand is evolving, not disappearing. Hybrid work models and downsizing create opportunities for well-positioned properties.
- Prices Are at Historic Lows – With buildings selling at deep discounts, this could be the best time to invest for long-term gains.
- Financing Challenges – Be prepared to pay cash or explore seller financing, as traditional loans for office properties are scarce.
- Location Matters – Areas like downtown Long Beach face unique challenges, but other locations near residential hubs may offer better prospects.
If you’re looking to explore office investment opportunities in Long Beach or Los Angeles, reach out to Sheva Hosseinzadeh for expert guidance.
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