After several bruising years defined by rising vacancies, declining values, and stalled deal flow, the office sector finally showed signs of life in 2025. Sharp price resets—some of the most significant in modern CRE history—opened the door for sidelined capital to re-engage, creating a measurable pickup in investor activity and hints that the market may be bottoming out.

Discounts revive deal momentum:

A multi-year valuation correction has been underway, but 2025 is when buyers really stepped back into the fray. According to Yardi, nearly 1,930 office assets traded in the first three quarters for a combined $37.6B—up more than 40% year-over-year. The common thread: pricing finally adjusted to levels investors considered defensible, reviving underwriting confidence and spurring a wave of opportunistic buys.

Markets taking the biggest hits also lead activity:

Steepest markdowns concentrated in metros already wrestling with structural challenges—Houston, San Francisco, Manhattan, Washington, D.C., and Dallas. More than 60% of trades in these areas involved discounted or distressed assets. Yet these same markets posted some of the highest Class-A activity, a sign that capital is chasing quality at recalibrated prices rather than retreating altogether. The “flight to quality” continues to define tenant and investor behavior.

Signs of stabilization begin to surface:

Trepp’s Q3 Property Price Index shows office values still roughly 15% below their 2022 peak, but the sector posted a 5.38% year-over-year increase—outpacing the broader CRE market’s 2.8% gain. It’s early, but it’s a meaningful data point: the freefall phase appears to be slowing, and selective recovery is taking root in stronger submarkets and higher-tier buildings.

Key forces behind the shift:

• Return-to-office tailwinds: More organizations are firming up in-office requirements, boosting utilization and supporting incremental absorption.
• Improved leasing velocity: Particularly in Class-A environments, where amenities, location, and energy efficiency give owners a competitive edge.
• Rate relief from the Fed: Two rate cuts brought the funds rate down to the 3.75%–4% range, easing debt costs and allowing valuations to stabilize. As noted by Trepp’s Eric Bao, this has helped reset risk pricing and unclog portions of the capital markets pipeline.

Urban cores regain relative strength:

For the first time since early 2022, CBD properties outperformed suburban counterparts. MSCI reports a 5.1% year-over-year rise in CBD valuations versus 4.5% in suburban areas. While the spread is modest, it signals renewed investor confidence in dense, amenity-rich business districts that were hit hardest earlier in the cycle.

Big capital commitments return:

Large-scale office acquisitions surged in 2025, with transactions over $100M surpassing all of 2023’s total by Q3. Investment volume across these deals reached $19B—up 35% year-over-year. Rather than speculating on quick rebounds, buyers are making long-term bets on discounted assets poised to benefit when leasing, pricing power, and financing conditions eventually normalize.

➥ THE TAKEAWAY

The office sector hasn’t made a full comeback—but it finally feels like the bleeding is slowing. Prices have corrected to more rational levels, investor engagement is rising, and early stabilization metrics are emerging. Still, the recovery remains fragile: the next several quarters will determine whether 2025 marks the beginning of a sustainable rebuild or simply a temporary pause before the next wave of stress.