Investors Are Gaining More Confidence in Office: Survey

Investment appetite for office transactions is showing signs of a revival in 2026.

Preference from commercial real estate investors for office transactions reached 11 percent in the second quarter. That compares to just 4 percent in early 2025 who listed the office sector as the one with the most opportunities, according to SitusAMC’s latest ValTrends quarterly research report shared exclusively with Commercial Observer ahead of its scheduled release later this week. 

While office sentiment in the survey was lower than the 16 percent registered in the first quarter,  overall trends within the property sector are on the upswing following years of investor confidence in the asset class hovering in the low single digits, said Peter Muoio, head of SitusAMC Insights.

Muoio said more clarity on valuations is driving the renewed interest.  Increased pressure on some distressed debt may also be a contributing factor behind the numbers, Muoio added.

“We’ve been seeing over the past year or year and a half the office investment conditions are improving,” Muoio said. “There is renewed interest.” 

Part of the increased bullishness toward office investments, according to Muoio, stems from “growing optimism” with the financial feasibility of executing office conversions. The report showed that office cap rates tightened by 10 basis points (bps) in the second quarter, but remained 80 bps above their long-term average. 

The increasing enthusiasm for office investments in the ValTrends report is part of a more evenly split preference for property types that has been developing over the past year, according to Muoio. 

Multifamily remained the top-ranked asset class in the second quarter, but optimism cooled in the survey from 60 percent to 36 percent compared to the previous quarter. Muoio said the drop was likely attributed to oversupply issues, particularly in the Sun Belt, taking longer to resolve than initially anticipated.

Investor preference for industrial rose 16 percentage points quarter-to-quarter to 32 percent to place second in the CRE sentiment rankings. Industrial sentiment was 35 percent in the year-ago period. 

SitusAMC Vice President Jen Rasmussen, who co-authored the report with Muoio, said expectations of increased demand for data centers from the growth of AI has driven much of the industrial optimism. Rasmussen cautioned, though, that data centers carry plenty of risks now as more people push back on the developments, including a recent moratorium in New York State.

“There’s tons of capital flowing into it, but we’re unsure about how AI is eventually going to play out,” Rasmussen said. “From a tenant base where you have a huge amount of space are you going to be able to repurpose it if it doesn’t come to fruition?” 

Retail placed third in the survey at 21 percent after climbing 13 percentage points from 8 percent during the prior quarter. Investors surveyed noted that retail demand is improving, particularly for well-located grocery-anchored shopping centers.

Investors surveyed by SitusAMC indicated that underwriting standards are “historically tight,” but that financing availability is on par with long-term averages. Muoio noted that borrowing standards remain “relatively restrictive” due to elevated interest rates, tighter debt service coverage ratio requirements and more scrutiny when exploring whether certain properties pose a refinancing risk.

“The discipline of both equity and debt capital is from a historical perspective stricter,” Muoio said. “Increasingly, what our clients are saying is we really need to know the few blocks or the immediate surrounding area for this property. So it’s leading to this much more fine-toothed view of how you’re underwriting whether it’s equity or debt.”

Andrew Coen can be reached at acoen@commercialobserver.com.