The commercial real estate market has rarely seen a sector falter and collapse permanently—everything eventually finds a way to rebound. As some experts are beginning to note, Marcus & Millichap is spotting “green shoots” of recovery in the office asset class in particular, suggesting that even this once beaten down sector may be poised for its opportunity to return.
In its 2025 Office National Investment Forecast, the company explained that while office properties continue to face a “particularly complex operating climate … some green shoots have begun to emerge.”
In three quarters of 2024, there was positive net absorption — marking the strongest office demand since 2019. The push for a return to office is strong among many companies with momentum shifting in that direction. However, as the firm says, remote and hybrid structures aren’t ending either.
The company’s National Office Market Index (NOMI) — based on forward-looking economic indicators and supply-and-demand variables — sees the strongest office market strength concentrated in the South and West. The top 10 metros are Tampa-St. Petersburg, Raleigh, Fort Lauderdale, Charleston, West Palm Beach, Miami-Dade, Las Vegas, Charlotte, Salt Lake City, and Orlando.
No metro from the Northeast or Midwest appears until New York City in number 11. Then, again, a short gap until Indianapolis appears as 15. Philadelphia is at 18; Columbus at 21; Boston ranked 25; Washington, D.C. at 30; Northern New Jersey at 31; Cincinnati is 32; Chicago, 35; Minneapolis-St, 38; Milwaukee, 40; Detroit, 42; New Haven-Fairfield Country, 48; Pittsburgh, 49; and Cleveland, 50. Those areas account for 15 out of the top 50.
As the index covers a one-year horizon, it doesn’t necessarily capture longer-term trends or some types of subtleties. Manhattan offices, for example, are catching investors’ eyes again with prime buildings in great locations having sold commercial mortgage-backed securities. So far this year, investors have bought $4.5 billion in bonds backed only by U.S. office assets. It’s the highest figure in five years. And law firm leasing hit the highest level in years, according to Savills.
There does seem to be an “inflection point” happening in office right now, but Marcus & Millichap pointed out that the office sector appeared to have reached one in 2024 as well. There are still hurdles, but when half of the nation’s 50 major metros are likely to see less than 0.5% inventory growth, the result will be the second-lowest national delivery since 2013. That will help keep a good balance between supply and demand.
Going forward, “buyer-seller expectations have come into greater alignment,” though there’s still a lot of dry powder on the sidelines. But good pricing relative to replacement costs and improved tenant demand will likely draw more investment activity.