The great space reckoning
With hybrid work entrenched, downtown office utilization hovers near 55 percent. Valuations have fallen 25–35 percent since 2019, while suburban logistics and residential conversions surge.
Table 1. Commercial Property Performance
| Sector | 2019 Cap Rate (%) | 2023 Cap Rate (%) | 2025 (f) |
|---|---|---|---|
| Office | 5.4 | 7.8 | 8.1 |
| Industrial | 6.2 | 5.5 | 5.6 |
| Multifamily | 5.1 | 5.8 | 5.9 |
| Retail | 6.4 | 6.7 | 6.5 |
Sources: CBRE, RCA.
Table 2. Office Utilization and Conversion Pipeline
| Metric | 2019 | 2023 | 2025 (f) |
|---|---|---|---|
| Office Utilization (%) | 95 | 55 | 57 |
| Office-to-Residential Conversions (# projects) | 32 | 117 | 185 |
Sources: Kastle Systems, NAIOP, Yardi Matrix.
Strategic implications
Urban landlords are partnering with municipalities to convert obsolete towers into housing. Financial institutions are stress-testing CRE portfolios amid refinancing risks tied to higher rates.
Leadership takeaway
Investors should prioritize mixed-use redevelopment, public incentives, and ESG retrofits. Adaptive reuse is emerging as the defining theme of the post-pandemic city economy.