US Office Market Report: Higher rates, lower valuations spur fierce headwinds


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Concerns over the office real estate sector remain elevated, particularly for older office buildings where few employees have returned to the office. Office real estate investment trusts have been plagued by low valuations throughout 2023, trading at vast discounts to their net asset value estimates and implied capitalization rates for the sector reaching their highest level in more than 20 years.



Key Takeaways:
  • Investors remain skeptical of the office market and continue to trade office REITs at vast discounts to their net asset value (NAV) estimates. Similarly, low valuations have pushed the median implied capitalization rate for the office REIT sector to its highest level in more than 20 years.
  • Price discovery remains limited, with office transaction volume down more than 60% in most major markets.
  • Banks are preparing for rough sledding, having built reserves to high single-digit percentages on loans tied to office properties.



If you are a client of S&P Capital IQ Pro, you can access the US Office Market Report here.

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