Office Recovery Begins After Deep Discounts

Office property sales rose sharply in 2025, signaling renewed investor confidence after years of market stagnation.
Deep discounts continued in major markets like NYC, San Francisco, and Denver, but pricing declines appear to be leveling off.
Office values grew 5.38% year-over-year in Q3, outpacing the broader commercial sector for the first time in years.
Recent Fed rate cuts and a modest return-to-office trend helped push investment volumes higher, especially for Class-A assets.

Key Takeaways

Pain Before Progress

After years of near-paralysis in office investment sales, 2025 saw a marked increase in activity, reports Bisnow. A total of 1,930 office properties sold for $37.6B in the first three quarters — a 40% year-over-year increase, per Yardi data via CommercialEdge.

But the long-awaited deal flow came with a harsh reality: sellers had to accept steep losses. In New York, 135 W. 50th St. sold for $8.5M, a staggering 97.5% drop from its 2006 price. San Francisco, Denver, and Houston also saw trades at discounts of up to 90%, reflecting the deep devaluation of urban office assets.

Are We at the Bottom

While distress remains widespread, analysts say 2025 might be the first year where values started to stabilize — and in some cases, increase. According to Trepp’s property price index, office values rose 5.38% year-over-year in Q3, exceeding growth in other property types.

Suburban and CBD offices both posted gains, with CBD prices up 5.1% and suburban values up 4.5%, per MSCI. It’s the first time since early 2022 that downtown office growth outpaced suburban counterparts.

Rate Cuts and Renewed Optimism

Many analysts credit the Federal Reserve’s recent policy shift for the early signs of stabilization. Two rate cuts this fall lowered the federal funds rate to 3.75%–4%, helping unlock new capital and compress cap rates.

Investor appetite is also returning, especially for larger, Class-A buildings. Through Q3, buyers have already closed more than $100M in office deals, surpassing 2023 totals. JLL expects these transactions to finish the year 30% above 2024 levels.

CBRE reports that Q3 investment volume hit $19B, a 35% increase from last year.

What’s Next

Even with modest value gains, office prices remain 15% below their 2022 peak, underscoring the depth of the correction. The distress hasn’t been limited to offices either — across asset types, some investors have accepted significant losses in recent sales, highlighting how price resets are rippling through the broader commercial real estate market.

Still, if momentum continues, 2025 may be remembered as the year the office sector stopped falling — and started its slow climb back.