The office market remains a challenging environment, especially for major specialized REITs. The landscape has grown increasingly complex: while occupancies have dropped significantly between 2019 and 2024, leasing activity has actually risen. Many of these REITs are also facing billions of dollars in maturing debt coming due in 2025. Despite these headwinds, property sales have surged, with transactions sharply up year-over-year, according to data from Trepp.
Trepp suggests that some of the largest REITs may now believe the worst is behind them for the office sector, though this is far from certain. Office distress has only recently begun to settle in, and the post-Covid era has introduced new dynamics in sales. Notably, even some high-end properties with strong occupancy and rental rates have ended up in special servicing.
A closer look at Trepp’s data reveals several key trends. Property prices are still down more than 20% from their 2022 peak, creating a painful buy-high-sell-low scenario for many owners. However, prices did “increase slightly” in the fourth quarter of 2024, which could signal that the market is bottoming out. In January 2025 alone, $6.2 billion worth of office properties changed hands-an 80% increase compared to the previous year.
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Vacancy rates remain elevated across most major office REITs. For example, Vornado Realty Trust’s occupancy fell from 96.7% in 2019 to 88.8% in 2024. SL Green Realty dropped from 96.2% to 92.5%, BXP from 93.0% to 87.5%, and Kilroy Realty saw a sharper decline from 93.6% to 82.8%. Only COPT Defense Properties managed to increase its occupancy, rising from 93.1% to 93.6%. These figures represent portfolio-wide averages, and as Trepp notes, in some cases, vacancy rates are so high that they signal a “landlord’s market.”
Changes in portfolio square footage also varied among the REITs. Vornado Realty Trust increased its leased space from 1.68 million square feet in 2019 to 3.44 million in 2024, while SL Green Realty grew from 2.47 million to 3.60 million. Others, like BXP and Cousins Properties, saw reductions in their portfolios, with BXP dropping from 6.77 million to 5.60 million square feet and Cousins Properties from 3.07 million to 2.02 million. The trends were mixed across the sector, reflecting the ongoing volatility.
Another significant development is the trend in coupon rates on debt maturities between 2025 and 2026. Most REITs have seen these rates fall-for instance, Vornado’s dropped from 5.00% to 3.83%, SL Green’s from 5.70% to 5.24%, and BXP’s from 6.16% to 3.20%. However, some, like Empire State Realty Trust, experienced an increase, with rates rising from 3.39% to 4.77%.
Finally, the share of loans in CMBS conduit collateral books backed by office properties has grown. In the first quarter of 2025, 16.13% of such loans were backed by office assets, up from 13.03% in the first quarter of 2024 and 14.65% for all of last year. This uptick underscores the ongoing significance and risk of office properties in the broader commercial real estate market.
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