After a multi-year lull caused by high interest rates and a wide gap between buyer and seller expectations, U.S. office buildings finally began trading again in 2025. The first three quarters of the year saw 1,930 properties change hands for a total of $37.6 billion, a 40.3% increase compared with the same period last year, according to Commercial Edge, citing Yardi data.
While some sales represented deeply discounted transactions, the uptick signals a potential shift in the long-stagnant market, according to BisNow.
Deep Discounts Highlight Challenges in Major Markets
Even as sales volumes rose, many properties traded at dramatic reductions. In New York City, a 920,000-square-foot office at 135 W. 50th St. sold for just $8.5 million — a 97.5% drop from its 2006 price.Â
In San Francisco, a two-tower property on Market Street changed hands for $177 million, down 76% from its 2019 sale.Â
Denver’s downtown office market also saw a two-tower, 900,000-square-foot property sell for $5.3 million, a sharp fall from $176 million in 2013.
Markets such as Houston, San Francisco, Manhattan, Washington, D.C., and Dallas recorded the highest share of discounted trades, exceeding 60% in the first half of the year, particularly among Class-A properties.
Signs of Price Stabilization Emerge
Despite these deep discounts, 2025 has shown signs of stabilization. Trepp’s third-quarter Property Price Index (TPPI) indicated that overall property values have largely stopped falling and are beginning to recover.Â
The equally weighted TPPI for all property types rose 2.8% year-over-year, while office-specific values increased 5.38% in the third quarter, outpacing the broader property market.
Renewed leasing activity, growing return-to-office mandates, and the Federal Reserve’s two recent rate cuts appear to be contributing to the early recovery.Â
Lower rates, now between 3.75% and 4%, are cited as a primary driver behind initial price gains.
CBD Offices Lead Gains Amid Suburban Growth
Central business district (CBD) office prices rose 5.1% year-over-year in September, surpassing suburban office growth of 4.5%, according to MSCI.Â
This marks the first time since early 2022 that annual price growth for CBD offices outpaced suburban properties, suggesting demand may be returning to urban centers.
Larger-Deal Activity Accelerates
Sales of office properties exceeding $100 million surpassed 2023 totals through the first three quarters of 2025 and are projected to finish roughly 30% above 2024 levels, according to JLL.Â
Office investment volume also climbed 35% year-over-year in Q3 to $19 billion, based on CBRE data.
Recovery Still in Early Stages
Despite these positive indicators, office prices remain about 15% below their 2022 peaks, underscoring the depth of previous declines. Analysts caution that the broader economic environment will ultimately determine whether stabilization continues or reversals occur.
Historically, during periods such as the financial crisis, commercial real estate values have fallen by 30% or more. While 2025 shows early optimism, the next several quarters will reveal whether the office market is regaining solid footing or experiencing a temporary pause.
