Office properties struggled in numerous cities in 2024 despite some high-profile return-to-office mandates. Average prices fell 11% year over year in 2024 and occupancy rates also rose nationally, according to CommercialEdge, a subsidiary of Yardi.
Large companies, such as Amazon, JP Morgan and Starbucks, have ordered employees to return to the office full-time. But according to CommercialEdge, office properties face an uncertain future as remote and hybrid models remain widespread.
At the end of 2024, the average price fell to $174 per square foot, down from $196 per square foot in 2023. That has continued the “massive devaluation since the onset of the pandemic,” the company reported.
Not all classes of office properties have necessarily bottomed out, said Peter Kolaczynski, director of CommercialEdge.
“Highly amenitized buildings in desirable locations have likely seen the floor, however, the volume of distressed assets being sold as the fates of more buildings’ are determined still pose a threat to regional and national averages that we monitor,” he said in the office market report.
Nearly 600 buildings, a third of all office properties with a known sale value in 2024, sold at a lower price than the property’s estimated value previous to the sale, according to CommercialEdge. The most extreme discount seen last year was 135 Wet 50th Street in Manhattan, which sold for $8.5 million, down 97% from its 2006 sale price of $332 million.
Several cities also saw dramatic increases in vacancies. Austin had the biggest increase in the vacancy rate with a 6.9% rise to nearly 28%. Other areas with large increases included Portland, Oregon, San Francisco, Philadelphia and Boston.
Exceptions to this ongoing trend were some major cities in Florida, where office properties have generally enjoyed higher occupancy rates.
