"A poll of over 100 office appraisers, brokers, and developers, discovered that 54 percent think office condominiums are a style that will end once interest rates go up.
The typical scenario finds companies buying the condos so they won’t have to pay rent again, giving them better control over space and residence costs. More and more office condos have been bought as savings lately. Phoenix is one of the largest markets in this niche, with 189 office-condo assets in place and over 100 others in various phases of development. But, other markets, such as Houston, with just three office-condo properties, hardly register, despite the fact that Texas City’s office sector is three times bigger than Phoenix's. "
Of a particular note are in offices condos that are bought as investments. Numerous real estate investors, including me, have financed these types of properties, just to get few if any potential tenants for the vacant space. In a market with the vacancy rate is moving between 15% and 20%, I felt it was wise to move out as quickly as possible. I’m very happy I did.
It’s not the value of the space that is the problem, but the fact that any renter that is a good candidate for this space will always simply buy their own office condo. Many of the forecasts for open the office condo space are beginners or small companies that can only pledge to a one- or two-year contract. These companies will either profit and get their own office condo or fold up shop and leave back to the extra bedroom home office from where they came from and abandoning the investor to attempt finding another tenant.
Make no mistake; these are nice properties, well developed with excellent finishes that are exceptional values for the owner/user. As an investor, I would find other areas, precisely industrial or warehouse properties, to invest my funds.