Guest Post by CORFAC International

Earlier this year when CORFAC International surveyed its independent members about business sentiment, one respondent claimed, “Office is back!” The degree to which you agree with that sentiment may be influenced by your location, the type of buildings, and particular client needs, but the office market is showing turnaround signs in 2025 after a lengthy post-pandemic correction. To dig into the dynamics, we asked in-depth questions of CORFAC brokers in three quite different locations – Eastern U.S., Midwest, and London.

Class A Office Market Remains Strong

 “Class A properties remain in demand amongst midsized and large employers to continue to foster and nurture their hybrid and in-office initiatives,” said Joel Meyer, SIOR, Principal, Intelica /CORFAC International in St. Louis. “That said, ‘return to office’ is becoming a fleeting phase, while the competition for culture and talent becomes the main driving force behind class A occupiers.”

Joe Latina, SIOR, of LMT Commercial Realty, LLC/CORFAC International in Wilmington, Delaware, said, “The office market has begun to show some early signs of stabilization and recovery after a long period of uncertainty primarily related to the COVID-19 pandemic. While challenges still remain, particularly in older buildings, vacancy rates have begun to decline and positive net absorption is being seen in some areas mostly driven by healthcare, law firms and financial-related service companies.”

In London, Charlie Thompson, SIOR, Managing Partner, Farebrother/CORFAC International, has encouraging news as well, “The office market is still extremely active and we will see this continue with firms demanding their staff back. A lot of the corporations are actively taking top-quality buildings. There have been some very strong rents achieved along with a lot more appetite to pre-let space due to the constricted development pipeline from 2026 to 2029.”

Charlie Thompson

Impacts on Class B and C Assets

The picture isn’t as rosy for lower-quality office buildings. Because Class A owners are offering favorable rents and extras, more occupiers are interested in moving up and getting more amenities and design, especially if they’re able to right-size the space they need at the same time.

Joe Latina

Latina explains, “Class B and C office buildings offer affordable options for smaller, budget-conscious and start-up companies. As Class A office owners continue to reduce asking rents, Class B and C buildings need to follow suit to stay competitive. We have found that it is more likely for a Class B or C tenant to move up to Class A in this market due to reduced rates.”

This has led to Class B office owners redeveloping and repositioning their holdings to try to compete for some of that higher-end market share and downward pressure on rents overall.

In London, Thompson says that lower-class offices still need to achieve certain energy performance grades to be legally available to be let. “We are seeing some of these buildings achieving change of use to hotels, residential and educational users. Most office tenants want good, top-quality space,” he added.

How Owners and Property Managers Are Competing

Since vacancies haven’t come down completely from their peaks, the competition to attract businesses is fierce. Owners are offering up an array of options to sweeten the deal.

Joel Meyer

Meyer notes, “Free rent incentives, large tenant improvement allowances and creative deal structures lead the charge, while amenities in both Class A and B product differentiate those assets from their non-amenitized competitors.”

Those amenities include roof terraces, business lounges, bike racks, luxury gyms and changing facilities, according to Thompson. Latina adds that incorporating technology such as app-based controls for lighting, HVAC and security, is creating a more modern, convenient and engaging tenant experience.

Investors’ Views on the Office Market

With the vacancy challenges of the past five years, it’s no surprise that office deals have been down, too. Access to financing remains volatile.  

“Investors are still seeing opportunities in premium office buildings burdened with debt or high vacancies at deep discounts. Many investors are also exploring conversions of outdated office spaces into apartments as the urban residential resurgence is still very strong,” Latina said. “However, financing does remain a challenge due to limited debt availabilities, higher interest rates and lower loan-to-value ratios.”

According to Meyer, portions of institutional interest have been replaced with local investor activity as the risk remains too high for most large institutional investors. These changes have created buying opportunities for well-capitalized individuals, family offices and smaller private equity groups. Debt and equity markets are smaller and more risk averse, but are seeing new optimism as positive office leasing news emerges nationwide. 

The consensus is that while appetite to make deals is increasing, alignment on pricing and getting the deals financed is holding dealmakers back. While opportunity exists, all deals are not created equal with submarket deal velocity, vacancy sizes and the underlying real estate all needing to be carefully considered beyond simply the present financial metrics.