BOCA RATON, FLA. AND EL SEGUNDO, CALIF. — A consortium of investors led by South Florida-based Workspace Property Trust has purchased a majority interest in a national portfolio of suburban buildings for approximately $1.1 billion. The seller was Griffin Realty Trust, a nontraded REIT based in El Segundo, Calif., that will retain a minority stake in the portfolio. The percentage of the stake was not disclosed.
The portfolio comprises 41 individual properties across eight states that house 53 buildings, the majority of which are single-tenant, net-leased properties. The assets span roughly 8 million square feet of leasable space.
In discussing the decision to invest in suburban office properties, Roger Thomas, co-founder and COO of Workspace Property Trust, cited the demographic migratory patterns that emerged in recent years that favor suburban markets.
“We know that in the last five years, millions of Americans have moved from the cities to the suburbs, and nearly one-third of all Americans today are considering moving away from cities,” says Thomas. “This important demographic shift is led by millennials, the largest workforce cohort in history, who appreciate the benefits of the suburbs and suburban offices.”
Thomas identified several attributes — shorter commutes, lower crime, less need for mass transportation, more affordable housing, better schools — as integral drivers behind the shift to the suburbs. Workspace Property Trust also cited data from CBRE stating that 66 percent of U.S. office inventory representing some 2.5 billion square feet is located in suburban markets.
The same report stated that in the second quarter of 2022, the overall vacancy rate for U.S. office buildings in downtown districts rose by 20 basis points, while aggregate vacancy across suburban office product fell by 20 basis points. The two subcategories now have vacancy rates of 17 and 16.8 percent, respectively, marking the first time in 20 years that downtown office vacancy has exceeded suburban vacancy, per the CBRE report.
“When Roger and I created Workspace in 2015, investing in suburban office was a contrarian bet,” says Workspace co-founder and CEO Thomas Rizk. “But today, it is the clear solution for corporations looking to provide a safe, accessible, flexible, lifestyle-oriented and community-based environment for their employees.”
Newmark arranged senior acquisition debt for the deal through J.P. Morgan and Bank of Montreal. Jordan Bock, founder of investment firm Mason Capital, served as strategic advisor and partner to Workspace. Seyfarth Shaw LLP and McCausland Keen + Buckman served as legal counsel to Workspace. Goldman Sachs, Eastdil Secured and Bank of America provided financial advisory services to Griffin Realty Trust.
Following this transaction, Workspace Property Trust now owns and operates 200 buildings totaling approximately 18 million square feet in 22 markets. Of that total square footage, about 7 million square feet is leased to Fortune 1000 companies.
— Taylor Williams