Market Summary 7.21.25

Is Office Making a Comeback—and What Does That Mean for CRE Investors?

Office real estate is back in the spotlight, but not because it's booming—because it’s shifting. Investors are watching closely as return-to-office trends gain slow but notable momentum heading into late 2025. The question isn’t whether the office sector is recovering; it’s how that recovery might ripple across the broader commercial real estate landscape.

While national return-to-office data shows occupancy hovering around 50% in some core markets, progress remains uneven. Urban cores like Manhattan, D.C., and San Francisco are leading, while many suburban and secondary markets are lagging behind. Still, this slow-build recovery is creating interesting, and in some cases overlooked, opportunities.

Notably, increased daytime populations in office-heavy areas are starting to benefit adjacent sectors—namely service-oriented retail and last-mile industrial. As foot traffic returns, so does demand for food, fitness, and convenience retail that caters to on-site workers. For investors, that means rethinking asset strategies: suburban office repositionings, mixed-use retrofits, and neighborhood-serving retail are all gaining traction as creative responses to a fundamentally different work environment.

Marcus & Millichap’s latest research suggests that while the office sector’s value reset is still underway, selective acquisitions—especially at a discount—are being successfully executed by groups who understand local demand drivers and hybrid work dynamics. Importantly, cap rates in this space have adjusted faster than fundamentals, offering a window for forward-thinking buyers to act before stabilization fully takes hold.

Looking ahead, investors would be wise to expand their lens beyond just core office metrics. A rising tide of workforce normalization could lift more boats than expected—especially in well-located retail and industrial submarkets.

For groups with dry powder and patience, suburban office repositioning and hybrid-flex models are increasingly compelling. In a CRE environment still defined by cautious optimism, the office sector may offer one of the more asymmetric opportunities of the year—if approached strategically.