Office REITs have faced significant structural challenges since the pandemic accelerated the normalization of remote and hybrid work arrangements. Corporate tenants are reducing their space footprints, and the consequence is rising vacancy in many markets — particularly in older, less functional buildings in suburban locations that lack the amenities that attract employees to the office. Class A space in prime urban locations has proven far more resilient: companies seeking to attract talent to in-person work are concentrating in high-quality, well-located buildings with strong amenity offerings, while subleasing or abandoning secondary space. Lease duration provides some earnings visibility — office leases typically run five to ten years, so existing lease income provides a runway even as overall demand softens. The problem emerges at lease expiration, when renewal rates and rents reflect current market conditions rather than historical demand. For investors, office REITs require careful geographic and quality analysis — premium urban office in supply-constrained markets with strong tenant credit is a very different investment from suburban office in markets with high vacancies and weakening lease economics.
