The U.S. commercial office market has been through a storm over the past few years—but for savvy investors, 2025 could offer a silver lining. Remote work and economic shifts drove office vacancies to record highs (nearly 20% nationally) and dragged property values down roughly 37% on average since 2019. These challenges, however, have created a buyer’s market in office real estate, and stabilization is setting the stage for a new cycle. Prices for office buildings are at cyclical lows and many owners are under pressure to sell, opening the door for investors to snap up quality assets at discounts. In this article, we’ll explore why now could be a promising time to hunt for office investments, the key trends reshaping office demand, current pricing dynamics, and practical strategies for individual investors seeking to capitalize on these conditions.
A Buyer’s Market: The Case for Office Investments
Office real estate hasn’t been this attractively priced in a while. By the end of 2024, the average U.S. office property traded at $174 per square foot, down 11% in one year and down from $277 (37% lower) than pre-pandemic valuations. In 2024 alone, nearly 600 office buildings—over one-third of all sales—sold for less than their previous sale price, a sharp jump from 386 such distressed sales in 2023. Many of these transactions came at fire-sale prices (over one-third sold at more than a 50% discount to their prior value). In short, investors are now able to buy properties at prices well below replacement cost, something virtually impossible during the 2010s boom.
Several factors have converged to create this buyer’s market. Rising interest rates and tighter lending have made it difficult for highly leveraged owners to refinance, forcing sales. Meanwhile, the persistence of remote/hybrid work left many offices underutilized, pushing vacancy rates to about 19–20% nationally in early 2025. These combined effects (high financing costs and lower demand) drove sellers to cut prices to attract buyers.
The good news for investors: the downtrend is starting to stabilize. Office prices fell less in 2024 (–11%) than in 2023 (–24%), and industry experts suggest values may be near a bottom for the best assets. With distress peaking and price discovery well underway, 2025 offers a window where buyers hold most of the negotiating power. It’s a classic contrarian scenario—buying when others are fearful—and history shows that those who step in early during a real estate downturn may reap significant gains when the cycle turns up again (“buy low, sell high”).
Key Trends Shaping Office Space Demand
Hybrid work is here to stay
Even as health concerns recede, many employees continue to work remotely part of the week. Office utilization rates hover around 50–60% of pre-2020 levels in many cities, and the national vacancy rate remains elevated at about 19.7% (up 1.8 percentage points from a year ago). This “new normal” means companies generally need less total office space than before.
However, the flip side is that employers are increasingly pushing people to come back in-person for part of the week. As of early 2025, many companies are implementing return-to-office mandates, including JPMorgan, Amazon, Toyota, and AT&T, and this trend is gradually boosting office attendance. In fact, leasing activity picked up enough that Q4 2024 marked the first quarter of positive net absorption (more office space leased than vacated) since 2021. In other words, after years of contraction, overall office occupancy is finally inching up again—an early sign that demand is stabilizing.
“Flight to quality” dominates tenant preferences
Companies that are leasing space in this environment are picky. There’s strong demand for high-quality, amenitized, and energy-efficient offices that can entice workers to commute in. Newer or recently upgraded buildings with great ventilation, natural light, collaboration areas, and sustainability credentials are filling up faster, while older and plainer office blocks languish.
Data from 2024 backs this up—ironically, many trophy Class A offices saw the biggest valuation drops (–22% in 2024), whereas average Class B buildings only dipped a few percent. This suggests top-tier properties were repriced from lofty pre-pandemic values, making them relative bargains now, and that well-located premium assets could lead the recovery as tenants seek “best in class” space. On the other hand, lower-quality offices in weak locations may struggle unless repositioned or repurposed. Savvy investors are accounting for this bifurcation in demand, focusing on assets that can be upgraded or are already in the “right” category to attract tenants.
Little new supply and adaptive reuse easing future competition
In most markets, developers have largely hit pause on new office construction. In 2024, U.S. office construction starts plunged by roughly two-thirds, and barely 9 million sq. ft. broke ground in the past year—a trickle compared to historical averages. The main exceptions to this are Austin, Nashville, and Dallas, which will face near-term oversupply, but the development pipeline as of early 2025 is just 0.7% of total inventory, so oversupply is unlikely to worsen overall. In fact, older underperforming buildings are increasingly being removed from office inventory altogether via conversions to apartments, labs, or other uses. While these conversions aren’t happening overnight (and often need public incentives), the trend means the glut of empty offices will gradually shrink.
For investors, this supply side pullback is encouraging: as the economy grows and companies adjust to hybrid work, even modest demand growth could significantly tighten vacancies over the next few years when combined with so little new construction. This dynamic underpins many bullish bets that today’s excess office space will find its equilibrium in the mid-term future.
Examples of office investment offerings on the EquityMultiple platform.
Pricing Dynamics and Outlook for 2025
It’s important to understand the current pricing and financial landscape in order to seize the opportunity. Office property pricing has reset to levels not seen since the Great Recession in many markets. Nationwide, average office sale prices are around $170–$175 per sq. ft., and cap rates (investment yields) have risen, reflecting the higher risk and higher interest rates. Notably, rents have not collapsed proportionally – asking rents have held fairly steady or even risen slightly (the national average listing rent is up ~5.8% year-over-year.) Landlords have achieved this by offering concessions (free rent, improvement allowances) to retain and sign tenants without slashing face rents. For a buyer, stable rents combined with low purchase prices mean the income return on new acquisitions can be quite attractive. Essentially, you can buy an office building today at a low basis and potentially enjoy a healthier yield on current in-place rents than was possible a few years ago.
Interest rates and financing remain a headwind but could soon become a tailwind, although it’s presently unclear how things may turn out. The Federal Reserve’s rate hikes in 2022–2023 greatly increased borrowing costs, which is a big reason cap rates jumped and prices fell. The Federal Reserve cut rates in late 2024, yet inflation has begun to rise again. However, there is cautious optimism that 2025 may bring some relief. In a recent industry survey, 67% of commercial real estate executives said they expect that interest rates will further decrease between 0-50 basis points in 2025, which would ease financing costs and improve property values. What this means for individual investors is that 2025 might be the inflection point: by acquiring assets before rates materially drop, you may position yourself to benefit from any upside as cap rates compress again (when loans get cheaper, many buyers can pay more, driving prices up).
Another aspect of pricing is that transaction activity is starting to thaw. Price discovery in the office market was difficult in 2022–2023—buyers demanded discounts, but sellers held on hoping for a rebound, so relatively few investments closed. In 2024, as distress forced sellers’ hands, volumes actually ticked up slightly (office sales totaled $41 billion in 2024, about $3.2 billion higher than the prior year). While that’s still well below “normal” levels, it indicates that buyers and sellers are finally finding a middle ground on price. This liquidity could be a positive sign: once enough transactions confirm the new pricing norms, it is possible that more investors (including institutional capital) may be comfortable jumping back in. Importantly, not every office asset will recover uniformly. Prime offices in thriving submarkets might see values stabilize first—in some areas we’re already hearing that “the bottom is in” for premium buildings. In contrast, aging offices in structurally weak locations could see further pain or require repurposing.
Investment Strategies for Individual Investors
So, how can individual investors take advantage of these conditions? Here are several strategies and tips to consider:
- Focusing on quality and location. As noted, tenants are gravitating to quality. An effective strategy is to target well-located Class A/B offices that are currently undervalued. For example, an older Class B building in a desirable suburban town center might be bought cheaply now and upgraded into a modern, attractive workspace. If a sponsor invests in improvements (like adding shared amenities, updating HVAC systems, or creating flexible layouts), they can attract new tenants and increase rents, thereby boosting the property’s value. Location is key—look for up-and-coming areas with growing populations or job bases where office demand could organically strengthen. Markets in the Sun Belt and select Midwest cities with diversified economies are showing resilience (some even have vacancy rates in the mid-teens, below the national average). CBRE lists Austin, Nashville, and Miami, along with Manhattan, as markets with high demand that can be satisfied by prime new office deliveries. A quality building in a market with solid fundamentals stands a better chance of leasing up as the overall office sector recovers.
- Consider adaptive reuse potential. Not every struggling office building can be saved as an office. However, those with the right physical attributes and zoning flexibility might be ripe for conversion to alternative uses like apartments, condos, hotels, or specialized facilities (think medical offices or life science labs). As an individual investor, you may likely partner with or invest in a development group for such projects rather than lead them yourself. The opportunity is that you can acquire a vacant office tower for pennies on the dollar, change its use, and create a highly in-demand product (for instance, residential units in a housing-starved city). Governments are increasingly discussing incentives and tax credits to support office-to-residential conversions, which could improve project economics. This strategy isn’t simple—it requires expertise and capital—but it’s a creative way to unlock value from obsolete offices. If you have access to real estate development networks or funds focusing on this niche, it’s worth exploring.
- Prepare for a longer hold. While we’re broadly optimistic about the outlook, office recoveries don’t happen overnight. As an individual investor, approach any office deal with a 2-5+ year horizon to allow time for leasing improvements and market conditions to normalize. Ensure that you have adequate cash reserves or financing locked in to cover operating costs and debt service, even if occupancy remains soft for another year or two. The upside scenario is that by 2026 and beyond, you could have an asset that was acquired at a rock-bottom basis now performing in a much healthier market. Patience and prudent asset management will be key to realizing the gains. In the meantime, any rental income (even if reduced) helps offset costs, and you may benefit from tax advantages like depreciation. Essentially, don’t bank on flipping an office property within a few months for a quick profit—treat it as a medium- or long-term value investment with potentially outsized returns down the road.
Diversify and manage risk. Finally, keep in mind that investing in the office sector does carry risks, and not every bet will pay off. It’s wise not to put all your capital into a single office asset. Diversify across different properties or investment vehicles if possible, and limit your exposure to what you can afford to have tied up for a while. Stay updated on local market trends—for instance, if a city’s office vacancy is still climbing or a major employer is downsizing, you might pump the brakes. Conversely, focus on opportunities where you see a catalyst for improvement (a new transit line opening nearby, a big company relocating to the area, etc.). By spreading your investments and choosing investments with solid fundamentals, you improve your odds of success in riding this office recovery wave.
Conclusion: Turning Challenges into Opportunities
The U.S. office real estate slump of the past few years has been painful for owners – but it’s also paving the way for bold investors to thrive. As of March 2025, the negatives (high vacancies, stricter financing, uncertain demand) are precisely why entry prices are so low and negotiable. We’ve seen data that suggests the market is nearing an inflection point: valuations have adjusted, usage rates are slowly rising, and industry optimism is creeping back. Remember, in real estate, the biggest gains often come to those who buy when sentiment is at its worst and hold until the cycle rebounds. The road to an office market recovery will have twists and turns, but the opportunities are out there for those ready to take a calculated risk.
Since buying a building outright is often beyond reach for individual investors, consider real estate crowdfunding platforms like EquityMultiple. Real estate crowdfunding sites and syndications may offer access to office redevelopment or distressed debt with modest minimum investments. EquityMultiple, for example, is open to accredited investors, offering investments in office real estate starting at $5,000. Do your homework on the specific markets and business plans, as some investment offerings are better positioned than others. (EquityMultiple equips investors with the platform’s track record to help with the due diligence process.)
