Office Recovery Gains Ground as Opportunities Lie in the Divide

Office momentum is, at long last, beginning to build. Absorption has moved into positive territory, the national vacancy rate is declining and investment activity remains near pre-pandemic norms.

But the recovery isn’t uniform. According to a recent Marcus & Millichap analysis, performance varies sharply by asset quality. Older buildings continue to struggle with vacancy, while newer, premier properties are achieving full occupancy and robust rent growth.

In short, office attendance and utilization are improving, but “recovery remains fragmented,” Marcus & Millichap said.

This could create opportunities for investors willing to take on more risk. Distressed assets continue to trade at substantial discounts, creating potential for redevelopment, repositioning and operational turnarounds, the firm said.

Stable cap rates have supported steady investment activity, although significant valuation and performance gaps remain across quality tiers.

The takeaway is that near-term performance will hinge on the continued return to office, which should generate additional space demand and support further occupancy gains.

For investors, however, the recovery will require a more targeted approach. Asset-specific analysis and hands-on expertise will be critical, particularly for those pursuing value-add and repositioning opportunities, Marcus & Millichap said.

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