The office real estate market has been fundamentally reshaped by a wave of macroeconomic pressures—rising interest rates, evolving work patterns, and shifting tenant demands. The landscape is almost unrecognizable compared to the days before the pandemic, leaving investors, developers, owners, and occupiers all asking the same question: When will the right moment arrive for distressed buying opportunities?
According to Trepp, that moment may finally be here. In recent years, the office sector has split into two distinct camps. Class A and Trophy properties have weathered the storm and continue to perform well. In fact, Trepp reports that in the first quarter of 2025, about $35 billion in total commercial mortgage-backed securities (CMBS) were issued, with nearly 29% of that tied to office properties—almost all of them in the top-tier category.
But beneath the surface, Trepp’s analysis reveals a different story for the rest of the market. The firm examined office properties across all ages with active loans, nationwide locations, and reported occupancy rates at or below 60%. Their findings: 279 U.S. office loans, totaling $9.02 billion, could be prime targets for distressed buyers.
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Properties with such low occupancy rates face steep challenges when it comes to refinancing. While high interest rates are certainly a hurdle, the real trouble often lies deeper—limited net operating income, deferred maintenance, and declining reputations all play a role. For buyers, however, these struggles can create motivation for sellers to offload their assets, sometimes at a significant discount.
The age of a building can also tip the scales. Older properties may be plagued by low ceilings, outdated layouts, and aging infrastructure, requiring costly upgrades to remain competitive. These expenses might only make sense as part of a larger redevelopment or conversion plan—or even a complete teardown to make way for a new Class A office building. Yet, as Trepp points out, even newer buildings aren’t immune; many are overleveraged and underwater in today’s market.
The numbers are stark: According to Trepp, office buildings constructed before 1950 have lost an average of 55% of their value since origination. Those built between 1950 and 1980 have seen values drop by 50%, while properties from 1981 to 2000 have fallen by the same margin. Even offices built since 2001 have lost 48% of their value. These statistics suggest that adjusting acquisition targets based on a building’s age could be a smart strategy, depending on a buyer’s goals.
Other crucial factors include a property’s debt service coverage ratio (DSCR) and its looming maturity wall. When a building’s value is low and its DSCR falls below 1.0, Trepp notes, it signals significant financial distress—often a sign of undervalued or mismanaged assets that could present opportunities for savvy investors. And if a property is approaching loan maturity without a willing lender to extend terms, sellers may feel even more pressure to make a deal.
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