Office investor demand way up in the first half of 2025, says JLL

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The recovery in the US office market is gaining steam this year and can be set to accelerate. Although space rates and the volume of return to shoulder have focus on measuring demand, a new view from capital markets to the office points to a stronger recovery than previously thought.

JLL, a global commercial real estate and investment management company, provided a special access to a limited distribution customer report of the property. The office processing momentum was significantly strengthened in the first half of this year and the total industry volume increased by 42% annually to $ 25.9 billion.

Only when JLL’s office sales transactions are examined, the volume increased from the first half of 2024 to the first half of 2025, and more than twice the momentum of the other large species of property, including data centers.

The report says that as the third quarter progresses in the third quarter, JLL actively keeps the transition from “office curious” to “office serious”. Low interest rates push most of this.

In addition, the number of bids in a particular transaction increased by 50% in the same period, only the second quarter has lived 16 billion dollars in the office bid volume, which has the highest three -month total total of three months since the second quarter of 2022, when the 10 -year Treasury return is below 3%. The bid volume can measure the growth and health of a sector from the perspective of capital markets.

“Typically, after a decline, highly clear private capital comes back because of opportunistic returns and starts to buy. GYOs follows and then retirement funds, separate accounts, corporate capital flows such as open marine capital, are currently playing exactly,” he said.

According to the report, the larger agreement request, which is 100 million dollars or more, increased by about 130% in the first half of this year compared to the same period in 2024.

Of course, there is a flight to the quality of the highest -level office buildings that sees most of the demand. When these buildings are full, the second -layer buildings will begin to see the increasing demand, and according to McDonald, it can really leave the top buildings behind because it is related to rent rates and absorption over the next five years.

The major office decline in the first years of the pandema caused a withdrawal in the planning of new buildings, so there are very few new office spaces during the construction phase. The market will see the office area of ​​only 6 million square meters delivered next year, which is below 90% of the annual average after the major financial crisis.

“Some people can slow it down; really hit a brick wall.” He said. “Next year, as proved by 6 million feet square, will be a lack of new deliveries based on 30 years of historical averages.”

He also pointed out that the office inventory is generally reduced, as old office buildings were torn or housing, hospitality, self -storage, or transformed into something outside the office.

The lowest quality, troubled segment still sees some bargaining hunters, so it has a bar-tubuk effect.

“We call them a dark substance, and they are important. A tower of 1 million square meters occupied in Detroit or Pittsburgh or Cleveland or Dallas city center.” He said. He continued: “A being may have been traded at $ 300 five years ago and can now buy for $ 50, very troublesome, very opportunistic returns, very low -foundation -looking capital. This low investment can reduce rent and have more speed because they have a lower, more competitive advantage.”

Since the company’s shrinkage rates are stabilized, tail winds for the office generally continue. Companies do not make much space anymore when they are displaced; In 2022, on average, when companies moved, they got rid of almost 20% of their fields. According to JLL, this is now fell to 3%.

This year, GYO purchases were strong. The stocks of Office GYOs such as BXP, Vornado and SL Green are higher in the last six months, but the largest Alexandria real estate stocks are still fighting.

Lower interest rates in the next few quarters will definitely help the debt cost for the agreement, but the ratios are due to the weakness in the economy. This creates a new pressure in the office market when it comes to demand from employers.

“We are very careful about what will happen on the influence, the real tenant and the companies that really occupy these buildings.” He said. “You should think that macroeconomics, geopolitical risks, everything that determines our general capital market environment and the price of debt is just a component.”

McDonald said he might be related to the leadership of corporate capital next year. These green shoots in the office market will increase both rental metrics and valuation in the next few years.