What is the target Internal Rate of Return (IRR) for value-add office investments?

The target Internal Rate of Return (IRR) for value-add office investments generally falls within the range of 10-15%. This reflects the balance that investors seek between risk and return in value-add strategies, which typically involve acquiring properties that may require some level of renovation or repositioning to enhance their value.

The rationale for this target IRR is that value-add investments usually entail greater risk compared to core investments, where properties are fully stabilized and yielding consistent income. However, they are less risky than opportunistic investments, which often involve more speculative strategies and higher development risks. Therefore, the 10-15% range serves as a reasonable expectation for investors looking for attractive returns while not venturing into the more risky profiles that would demand higher IRRs.

This target aligns with market expectations and the typical performance of value-add properties, making it a standard benchmark for investors in this asset class.