U.S. Office Market Coming Back
Owners of high-quality office buildings in good markets should be on better footing today than a year ago, the real estate analytics firm Green Street said.
NEW YORK — In 2024, the volume of office building sales rose by 20% from a year prior to $63.6 billion, marking the first increase in sales volume since 2021, the data firm MSCI data found. However, the sales activity is still far lower than the 2015 to 2019 volume average of $142.9 billion per year.
Investors are reentering the market to buy half-empty towers and premium buildings burdened by debt, while others are bidding on obsolete office properties that they can convert into apartments. Later in 2025, foreign investors could reenter the market, bringing with them a larger surge in sales volume.
Data fund Preqin said that by the end of 2024, real estate funds had $196.8 billion in cash sitting on the sidelines, up from 2020's $179.9 billion. In December 2024, Norges Bank Investment Management purchased the 50.1% stake it didn't own in eight office properties located in Washington, D.C., Boston, and San Francisco.
John McCarthy, head of U.S. real estate for Norges, said, "We see an opportunity being a very large capital source that is willing to write checks in a sector that most of our peers are still not willing to invest in."
A number of businesses are now requiring employees to return to the office, and leasing activity has increased, which has helped push up interest in the office market. In its January report, real estate analytics firm Green Street said owners of high-quality office buildings in good markets "should be on much better footing to start the new year than they have in recent memory."
Some headwinds the office market must address include loan delinquencies and high vacancy rates, as well as values that dropped 35% to 60% since the pandemic on premium grade A office buildings.
Source: Wall Street Journal (01/28/25) Grant, Peter
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