Not so long ago, office sector news was primarily negative due to higher vacancies, work-from-home pushback, and maturity woes. Cushman & Wakefield’s recently released “Tide is Turning: Re-evaluating U.S. Office Investments” suggests that the change is coming as “a range of indicators for market momentum have been improving since the middle of last year, and investor attitudes toward the office sector are gradually reforming.”
Specifically, higher cap rates and office space availability stabilization are attracting investors to and boosting lending in the sector.
Here’s what the fundamentals have to say.
Remote Work Slows
The U.S. Bureau of Labor Statistics reported that the number of fully remote workers had increased only 0.6% year over year as of April 2025. Additionally, a Cushman & Wakefield/CoreNet Global occupier survey said that 85% of firms haven’t changed their hybrid work policy or increased in-office attendance expectations.
The move toward higher office utilization is helping “tenants to proceed more confidently with leasing decisions,” said Cushman & Wakefield analysts.
Space Availability Declines
Between shrinking construction pipelines, a decline in sublease space, and improving demand, the total U.S. available office space has declined for three consecutive quarters.
In quoting NAREIT, the Cushman & Wakefield experts explained that same-store NOI reported by office REITs declined 0.3% year-over-year in Q1 2025, improving steadily since the declines were 1.8% in early 2024.
Debt Liquidity Returns
CMBS experienced the highest total debt issuance in Q1 2025 since 2007. CMBS loans for office properties stood at $11.4 billion in the first quarter, tripling the amount reported in Q1 2024. Additionally, debt funds and private lenders are increasingly active.
The fundamentals are “providing lenders with the confidence they need to begin redeploying debt capital to a sector that has been starved of liquidity for almost three years,” the report said.
The Analysts’ Recommendations
The Cushman & Wakefield experts suggested that potential office investors consider the following strategic paths.
- Take advantage of the basis reset. Upward inflections in office pricing and volumes make for an attractive investment entry point.
- Don’t write off the sector as just opportunistic. There are plenty of office properties with high occupancy and dynamic locations. The analysts said, ” There are compelling investment strategies across the full spectrum of office properties, including top-tier, core and core-plus properties.”
- Look toward shortages of trophy space. Tenants’ flight to quality combined with falling inventory should set the stage for eventual scarcity of prime office space in many markets. Additionally, Class A-minus properties could benefit from spillover demand.”
- Be patient when targeting distressed and lower-quality properties. The report said that “distressed office sales only began picking up in earnest 18 months ago.” Buyers interested in this property type might want to consider building relationships with lenders and workout teams, as “opportunities for recapitalization, acquisition, conversion and/or redevelopment of low occupancy properties aren’t likely to diminish overnight,” the Cushman & Wakefield analysts said.
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