Office Sale-Leasebacks Fall Out of Favor

The sale-leaseback option is looking pretty good to owner-occupiers for many property types these days. For companies that might have invested heavily in amassing their own real estate, or even just acquiring their own headquarters building, the opportunity to offload a property and pocket some cash while staying put in your space under a lease agreement is proving to be a popular alternative in these precarious economic times. Some companies pursue sale-leaseback deals in an effort to go asset-light and extract value from their properties and others utilize such transactions as an alternative to seeking financing in the frosty capital markets.

The numbers tell the story. Looking at the United States sale-leaseback market since 2018, 2022 marked a groundbreaking year for these niche transactions, with sale-leaseback deals reaching a record high, both in volume and dollar amount, according to research from SLB Capital Advisors. However, the chart-topping activity occurred with little thanks to the office sector. Office sale-leasebacks accounted for just 8 percent of all sale-leaseback transactions in 2022, marking a 50 percent drop from the sector’s claim of 16 percent of sale-leasebacks in 2019.

It wasn’t so long ago when the office sector accounted for a substantial segment of sale-leaseback activity. W.P. Carey is a net-least REIT that is widely credited as a pioneer of the sale-leaseback concept in the U.S. They used to have a global portfolio consisting of roughly 30 percent of office properties several years ago, but today their office exposure totals just 17 percent.

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