What is the sign of a market bottom in office? Some say it’s when the vacancy rates peak, or when the big losses show up in sales. A different sign is when investors return to put their money down.
That started happening in 2025 in New York City, according to Bloomberg. Investors are returning to the property type and its securitization.
Not for all office properties. There remains a bifurcation in which the problem hasn’t been too much inventory, but too little, Brookfield has said. "There is an excess of dated, functionally obsolete office buildings and an undersupply of offices that satisfy tenants' changing needs," they have written. Instead of companies not needing office space, "tenant preferences have shifted to buildings with modern amenities and functionality, and the recent rise in interest rates has exposed older office buildings as uneconomical."
The top 25% of buildings see stable vacancy rates and record-high rents. "We believe this growing divide will only widen as legacy leases expire and tenants look for new space that reflects evolving business culture to engage employees and meet sustainability goals," Brookfield wrote.
For the top buildings, interest abounds in the “flight to quality” that GlobeSt.com sources have noted. Park Avenue office availability has hit a six-year low. Demand is up and supply can’t keep abreast. That interests investors. It’s a change from the previous four years. The properties that are tickling fancies are prime buildings in desirable locations.
Early in February, the Irvine Company was close to refinancing its Midtown, Manhattan skyscraper, the MetLife Building, through a $1.5 billion loan. RFR Holding was reportedly near a deal to refinance the Seagram Building for $1.2 billion.
Already in 2025, prime buildings in great locations have been able to sell many commercial mortgage-backed securities, according to Bloomberg. Investors have already poured billions into the aggregate. In 2024 Q4, there was a single $3.4 billion CMBS sale backed by the Rockefeller Center.
So far this year, investors have bought $4.5 billion in bonds backed only by U.S. office assets. That is the highest figure in the last five years. According to Deutsche Bank data, such securities in February were 35% of single-asset commercial mortgage bonds sold.
Premiums on riskier CMBS deals have dropped from 325 basis points from the Rockefeller deal last year to below 200 basis points for the Seagram Building deal.
For Class B or C properties, however, there is much less investor appetite because of the smaller tenant demand. Deutsche Bank CMBS strategist Ed Reardon said much of the interest is on behalf of insurance companies that want to lock down future payments for annuities they’re responsible to pay. Credit products have become something the insurers want, especially if they come with higher yields.
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