- US commercial property prices increased in the first quarter, with office assets leading annual gains despite ongoing volatility in major markets.
- Large office buildings in gateway cities continue to trade at steep discounts, while smaller deals in secondary markets are driving price growth.
- Regional performance diverged sharply, with the South leading gains and the West US lagging across all major property types.
Commercial real estate prices pushed higher in early 2026, but the rebound remains uneven, reports CoStar. While overall gains were supported by office sales and smaller transactions, sharp discounts on large assets—especially in coastal gateway markets—underscore continued stress in parts of the sector.
A Split Office Market
Office properties recorded the strongest annual price growth among major asset classes, rising 9.9% over the past year, according to CoStar’s repeat-sale indices. But that headline number masks a growing divide.
Large, high-profile office towers in cities like San Francisco, Boston, and New York are still trading well below prior valuations. Value-weighted office prices—heavily influenced by these big deals—fell 8.7% year over year in March.
Meanwhile, smaller office transactions in secondary and non-gateway markets told a different story. Equal-weighted prices, which better reflect these deals, rose 1.8%, with cities like Dallas, San Jose, and Richmond posting gains.
Big Discounts, Selective Wins
Several major office sales highlight the pricing disconnect:
- A San Francisco office property at 123 Mission St. sold for $100M—nearly $300M below its 2019 price.
- Boston’s Park Square Building traded for $95M in foreclosure, marking a $150M drop from 2020.
- In contrast, Dallas’ Pinnacle Tower sold for $163.3M, up $75.8M from its prior sale.
These deals reflect a broader trend: distress and repricing in legacy office assets alongside resilience in select growth markets, as investors increasingly gravitate toward smaller, less risky deals while large assets face mounting pressure from vacancies and pricing uncertainty.
Other Sectors Show Mixed Results
Outside of office, performance varied by asset class and deal size:
- Industrial: Prices rose 1.2% overall, with smaller assets outperforming due to stronger rent growth.
- Multifamily: Value-weighted prices edged up 0.9%, while smaller deals saw slight declines.
- Retail: Continued to lag, with prices down 2.3% year over year.
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Regional Divergence Widens
Geography played a major role in pricing trends:
- South: Led the nation, with broad-based gains across all property types and strong quarterly momentum.
- Northeast: Mixed performance, as office weakness offset industrial gains.
- Midwest: Modest growth, supported by industrial strength.
- West: Continued to struggle, with all major sectors posting annual declines and retail falling the most.
Why It Matters
The latest data reinforces a key theme in today’s CRE market: recovery is highly selective. Smaller deals, Sun Belt markets, and niche segments are driving gains, while large urban office assets remain under pressure.
What’s Next
As transaction activity picks up, pricing clarity is improving—but not evenly. Expect continued divergence between asset classes, deal sizes, and regions, with investors favoring markets and properties tied to stronger fundamentals and rental growth.
