Office Vs multifamily - why the same cap rate despite more risk?

[Michael Anuzis]

Anyone with experience owning both offices and multi-family properties able to share the relative risks of each? Looking to invest in class B properties between $450k-800k and 7-10% cap in Michigan. I've read that with offices "you're buying the leases and the building comes for free", but every office I see listed has 30-50% of revenue associated with leases expiring within 2-3 years.

It's difficult to be confident in lease renewals when I see hundreds of office vacancies large and small around Michigan. It's also a turn off that class B offices with only 2-3 tenants easily cash flow negative with the loss of one tenant. Compared to multi-family buildings in the same price range with 15-20 units that remain profitable with 3-4 vacancies, which are generally straightforward to fill, offices look more risky in almost every way.

Attracted to offices having lower maintenance tenants, but that doesn't seem worth the riskier investment dynamics. Cap rate is supposed to reflect investment risk, but 7.5 cap multifamily appears significantly lower risk than 7.5 cap office. Am I missing something?

Appreciate any insight from more experienced investors.