Distressed Office Investments Hit Decade High

Distressed Office Momentum Builds

Globe St reports that distressed office deals surged in 2025, reaching $4.3B and marking a 10-year high, according to Colliers. Investors traded 168 properties, a 31.3% increase from 2024, as interest grew in discounted assets. Buyers chased value in a shifting office market shaped by falling prices and evolving demand.

Private buyers drove over half the activity, signaling strong interest in value-add and repositioning plays. New York City led the market with $1.1B in deals as leasing showed signs of recovery.

Pandemic Fallout Reshapes Offices

The distressed office sector’s rise stems from major shifts in office usage since the pandemic. Remote work models and hybrid schedules have reduced demand, while occupancy levels gradually recovered—Kastle Systems data indicates office use reached 54% of pre-pandemic rates, and 78% for top-tier Class A-plus buildings by 2024. Despite some stabilization, many older properties remain at risk, fueling ongoing distress.

Discounts and New Benchmarks

The market adjustment has led to steep discounts and new pricing norms for distressed office assets. Investors are focusing on opportunities to lease up vacant space or convert underperforming buildings. CRE distress overall hit $107B in Q4, with office and multifamily properties accounting for the largest share of that total. With mounting loan defaults and pressure on valuations, the distressed office market continues to evolve as buyers seek both immediate and long-term upside.