How has hybrid work changed the office sector's investment profile, and why is office such a capital-hungry property type?

Hybrid work structurally reduced demand per employee, pushing vacancy up and forcing a bifurcation: newer, amenity-rich trophy buildings in prime locations still compete for tenants seeking to pull workers in, while commodity older stock faces persistent vacancy, falling rents, and in the worst cases negative equity and conversion or demolition math. Separately, office was ALWAYS capital-intensive: winning or renewing a tenant requires large tenant improvement allowances and leasing commissions, plus ongoing building capex - so a meaningful slice of NOI never reaches the owner as distributable cash. That is why office FFO overstates its cash economics more than any major sector, why office AFFO conversion is poor, and why underwriting office requires modeling TI/LC costs at every lease rollover rather than trusting the headline cap rate.