More Signs Point to an Office Turnaround

Survive to ‘25. That has been the prevailing sentiment in real estate for the past few years, especially in the struggling office sector. Reduced demand due to the persistence of hybrid and remote work, combined with rapidly rising interest rates, has put fear into nearly every office portfolio manager. By late 2024, conditions remained bleak—interest rates showed no signs of dropping, and nearly a trillion dollars in commercial mortgage debt was set to come due in 2025. Many had begun shifting their mindset from “Survive to ‘25” to “Survive through ‘25.” But now, just a few weeks into the year, there are signs that office real estate may finally be poised for a turnaround.

The first positive sign comes on the lending front. The Mortgage Bankers Association released a report showing that lending for office had increased by 105 percent, leading all property categories. Lending is up across the board with commercial mortgage-backed securities having the most dramatic increase...