Why Smart Money Is Focused on Real Estate Investment Business

Key points:

• • The U.S. office market is stabilizing, with leasing activity recovering and tenants taking on more space.
• • Demand is concentrated in high-quality, amenity-rich buildings, driving a clear “flight to quality.”
• • Limited new supply and rising investor confidence are supporting a gradual market recovery.

April 2026 — The U.S. office market is gradually regaining stability, although not evenly. While overall vacancies remain elevated, demand related to real estate investment business is increasingly concentrated in high-quality, well-located buildings. As a result, office tenants are committing to more space than they are giving up, signaling a meaningful step toward recovery for the first time since 2019.

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This shift reflects a broader recalibration across the market. After years of uncertainty around remote work and space utilization, companies now have a clearer understanding of how much space they need — and more importantly, what kind of space supports productivity, culture, and employee engagement.

Steve Smith, executive vice president at McKenney’s, told Invest: Charlotte that the market is now settling into a more balanced dynamic after companies worked through their return-to-office strategies. “We’re seeing a shift toward hybrid work, which seems to be where most companies and employees are landing.”

Demand returns, selectively

Recent data from the CBRE shows that leasing activity is recovering, even if it has not fully returned to pre-pandemic levels. The United States recorded 21 million square feet of annual absorption in 2025 and 225 million square feet of leasing activity, just 3% below 2019 levels.

At the same time, the market is seeing a clear divergence in performance. Prime office buildings continue to outperform, with vacancy rates consistently lower than the broader market and rents showing renewed growth. Average asking rents increased by 1.9% year-over-year in 4Q25, reaching $36.85 per square foot.

This trend is particularly visible in major urban markets, where leasing activity has rebounded more strongly. Downtown districts accounted for 42% of leasing activity despite representing only 35% of total supply, reinforcing the renewed appeal of central, amenity-rich locations.

Flight to quality 

Across markets, tenant preferences are clearly shifting toward higher-quality environments. Buildings that offer modern design, strong amenities, and proximity to transit and lifestyle features are capturing a disproportionate share of demand.

According to CBRE’s 2026 outlook, the performance gap between prime and non-prime assets is near record levels, with occupiers prioritizing top-tier spaces and increasingly competing for limited availability.

That dynamic is already playing out at the local level. For Invest: Greater Orlando, Andrei Savitski, executive vice president of CBRE, “Landlords that have invested in amenities and higher-quality environments are capturing demand, and that is pushing rental rates to levels we have never historically seen in Orlando.”

He added that rents approaching $40 per square foot, once considered unrealistic for the market, are now becoming achievable in top-tier assets.

Rebalancing the market

One of the most important structural changes supporting the office sector’s recovery is the sharp slowdown in new construction. In 2025, office inventory removals, including demolitions and conversions, outpaced new completions for the first time since tracking began in 1988.

This reduction in supply is beginning to rebalance vacancy rates, which have shown early signs of stabilizing after reaching record highs. National vacancy has edged down from 14.2% to 14%, according to a CoStar report, suggesting that the market may have passed its peak.

At the same time, pricing trends reflect a similar recovery trajectory. Office sale prices rose 6.1% in 2025, according to ScotsmanGuide, marking the first increase since 2021, with class-A properties outperforming lower-tier assets.

In markets like Miami and Orlando, values have already surpassed pre-pandemic levels, highlighting the strength of demand for well-positioned properties.

Investor sentiment shifting

After several years of uncertainty, investor confidence is also beginning to return, particularly for high-quality assets.

“Office was deeply out of favor a few years ago, and some investors who leaned into that space are now closing deals that look attractive in hindsight,” Peter Mekras, president of Aztec Group, noted for Invest: Miami, 

This renewed interest reflects a broader recognition that the office sector is not declining uniformly, but rather undergoing a transformation. Assets that align with evolving tenant expectations, including flexibility, technology integration, and experiential design, are increasingly viewed as long-term opportunities.

Redefining value proposition

While challenges remain, particularly for older and less competitive buildings, the office market is entering a new phase defined by selectivity rather than broad-based decline.

Companies are no longer simply deciding whether to return to the office. They are deciding what kind of office is worth returning to. This shift is reshaping everything from leasing patterns to investment strategies and development pipelines.

As demand continues to concentrate in high-quality environments and supply remains constrained, the gap between top-tier assets and the rest of the market is likely to persist. For investors, developers, and tenants alike, the opportunity lies in understanding that the recovery of the office sector is not uniform, but increasingly driven by quality, experience, and long-term relevance.

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