Office performance is shifting slightly after a stronger mid-year showing, driven by positive absorption and decreasing availability of Class A, amenity-rich assets, according to a Crexi market analysis. The firm said investors should expect diverging trends with quality buildings in strong submarkets benefiting from limited new supply and rising tour volume, while older or less desirable properties lean on conversion paths, deeper tenant improvement packages or discounted trades to attract buyers.
November data reflected this bifurcation. Slightly declining sale pricing and a 2% increase in vacancy indicate that the most desirable assets are becoming scarcer, buoying overall closed pricing and keeping the gap between asking and effective rents stable. Price discovery continued through the end of 2025, with the average sale price per square foot falling to $170.54 in December—down 2.3% month-over-month but up 11.5% year-over-year. Asking prices for quality properties rose 2.3% month-over-month to $230.03 per square foot, up 1.1% year-over-year, signaling that sellers of premium buildings maintained pricing discipline even as deal activity remained selective.
Cap rates also highlight the market split. Sale cap rates held flat month-over-month at 7.39% but improved 16 basis points year-over-year, while asking cap rates ticked up just two bps to 7.17%, reflecting a narrowing bid-ask spread. The tighter gap underscores growing confidence in Class A assets, even as execution remains cautious for commodity office space.
Office vacancy on Crexi surged 150 bps month-over-month to 21.3%, yet remained 100 bps below December 2024 levels. While marketed inventory increased slightly, year-over-year trends show lower-quality space transitioning to alternative uses or remaining unmarketable. Leasing data mirrors these dynamics, with asking rents holding flat at $19.95 per square foot, while effective rents dipped 1.2% monthly to $20.45 per square foot, but till 3.7% above year ago levels.
Landlords are offering more concessions every month, but annual pricing power persists, particularly for Class A assets, where tour activity and lease renewals are picking up.
Nationally, the office market has improved, with Q3 net absorption positive and vacancy down 20 bps to 18.8% — the first year-over-year decline since early 2020.
Leasing volume rose to 52.4 million square feet, though recovery remains uneven. Some buildings still require aggressive economics to compete, and selective demand continues to favor high-quality assets, according to Crexi.
U.S. CRE transaction volumes rebounded roughly 25% year-over-year in Q3, including a lift in office sales. CMBS updates for November showed the overall delinquency rate easing 20 bps to 7.26% after October’s rise, though office remains the main pressure point. A September spike in office late payments linked to a large NYC default, along with job cuts and continued hybrid work trends suggest that recovery will remain selective in the near term.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.