Five years after the pandemic upended how and where people work, the office real estate sector remains one of the most debated corners of private real estate.
Headlines continue to focus on empty buildings, remote work, and declining valuations. Yet beneath those headlines lies a more nuanced reality. Some office properties are struggling to find relevance, while others are achieving record rents. Some cities are still searching for a post-pandemic identity, while others feel as busy as ever. And despite widespread skepticism, investors continue to uncover compelling opportunities in select markets and capital structures.
In a recent conversation, Meketa private real estate consultants Rajeev Ranade and Scott Maynard explored how office has evolved, what the office of the future may look like, and where investors should be focusing their attention today. Drawing on perspectives from opposite sides of the country and years of institutional real estate investing experience, they examined the forces reshaping office and what those changes mean for investors.
A Market Redefined
Few property sectors experienced a shock as dramatic as office. The combination of rising interest rates, remote work adoption, and changing tenant preferences has fundamentally altered the economics of the asset class. Office values have declined significantly from their peaks, tenants have reassessed their space needs, and investors have been forced to rethink long-held assumptions about the sector’s role within diversified portfolios.
Yet office’s challenges did not begin with the pandemic. Even before 2020, the sector was grappling with co-working models, evolving workplace preferences, and competition from newer, less capital-intensive real estate sectors.
The pandemic accelerated trends that were already underway and compressed years of change into a matter of months.
A Tale of Two Cities
Perhaps one of the biggest mistake investors can make today is treating office as a single market: reality may very well be more fragmented.
Rajeev, living in New York City, faces an office environment that feels remarkably close to pre-pandemic norms. Crowded commuter trains, active business districts, and strong demand for premier office space suggest a market that has largely reestablished itself as a center of economic activity. While Scott’s experience in Portland, Oregon, where office utilization remains among the lowest in the nation, continues to redefine its purpose in a post-pandemic world.
The contrast highlights a broader truth about office today: there is no single office market. There are many office markets, each responding differently to shifting workplace expectations, local economic conditions, and demographic trends.
The Office of the Future: From Obligation to Destination
The future office is unlikely to resemble the office of the past. For decades, office buildings served a straightforward purpose: providing a place where work happened. Today, that monopoly no longer exists. Employees can work from home, from co-working spaces, or from virtually anywhere with an internet connection. As a result, offices find themselves competing for attendance.
Workplaces also find themselves more generally diverse than ever which has contributed to the need to have offices that have an increasing number of amenities.
The most successful workplaces increasingly emphasize convenience, accessibility, amenities, collaboration, and flexibility. Proximity to transit, wellness offerings, restaurants, gathering spaces, and diverse work environments are becoming as important as traditional office design considerations.
The question is no longer whether employees can work remotely, but whether the office experience is compelling enough to justify the commute.
The Buffet has Gotten Bigger… Is Office Still a Core Real Estate Sector?
Historically, investors often thought about real estate through four primary sectors: multifamily, industrial, office, and retail, but perhaps that framework is being challenged.
The investable universe has expanded significantly, offering exposure to data centers, self-storage, senior housing, life sciences, manufactured housing, student housing, and many other specialized property types.
At the same time, office’s historical advantages have weakened. High capital expenditures, leasing costs, tenant improvement expenses, and changing demand patterns have raised legitimate questions about whether office still deserves a permanent allocation within core portfolios.
AI and the Next Office Cycle: Opportunity or Another Wave of Disruption?
Artificial intelligence has emerged as one of the most influential drivers of office demand in certain markets. San Francisco has become a notable example, with AI companies contributing meaningfully to leasing activity and helping drive renewed momentum in select submarkets, and yet their may be a need to caution against drawing overly simplistic conclusions.
While AI-related leasing has undoubtedly provided support, questions remain regarding the durability of demand and the financial strength of some emerging tenants. Venture-backed growth companies have historically generated leasing booms before, most notably during the life sciences expansion cycle.
While AI may become a powerful catalyst for certain office markets, it may also introduce new risks by accelerating workforce productivity and changing long-term space requirements. The answer remains uncertain, but the implications are too significant to ignore.
Finding Opportunity in a Fragmented Market
Periods of disruption often create some of the most compelling investment opportunities, and the office market appears no different.
For some investors, that means pursuing credit investments rather than equity exposure. For others, it may mean focusing on office-to-residential conversions, redevelopment opportunities, or international markets where office fundamentals remain stronger than in the United States.
What is clear is that office investing has become increasingly idiosyncratic. The days of making a broad allocation to office as a sector may be fading. The future likely belongs to investors willing to apply a finer lens and distinguish between assets that are adapting to new realities and those that are not.
The Future of Office Isn’t One Story
The future of office is unlikely to be defined by a single outcome. Some buildings will thrive while others will be repurposed. And the same can be said about markets—some will rebound more quickly than expected, while others continue to evolve.
For investors, the challenge may not be to determining whether office markets will recover, but determining which offices, which cities, and which strategies are positioned to succeed in a world where the office no longer dictates how people work; this important distinction may ultimately define the next decade of office investing.
To get the full conversation on office between Rajeev and Scott, click on the video below.
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