Spike in Office Investor Demand in H1 2025 Reveals JLL Report

september 27, 2025

New York, NY – The united states office market is experiencing a notable resurgence, fueled by growing investor interest and declining interest rates. Recent data indicates a considerable increase in transaction volume, signaling a shift from cautious observation to active investment in the sector.This recovery is particularly evident in high-quality buildings, but experts predict benefits will eventually extend to secondary properties as well.

Investment Volume Surges

Total industry transaction volume for office properties jumped 42% year-over-year, reaching $25.9 billion in the first half of 2025. JLL reported that its own office sales transactions alone increased by an notable 110% between the first halves of 2024 and 2025, outpacing growth in other property types, including the booming data center market. This momentum reflects a growing sense of optimism among investors.

The Role of Interest Rates

A key driver of this renewed interest is the recent easing of interest rates. Lower borrowing costs are making office investments more attractive, prompting increased bidding activity.The number of bids per transaction rose by 50% in the same period, with the second quarter recording $16 billion in bid volume – the highest quarterly total since the second quarter of 2022 when the 10-year treasury yield was below 3%.

Shift in Investor Sentiment

Mike McDonald, Senior Managing Director and Office Group Leader at JLL, explained the current dynamic. He noted a pattern of high-net-worth individuals entering the market first, followed by Real Estate Investment Trusts (REITs), and large institutional investors like pension funds. “That’s exactly what’s playing out right now,” he stated, highlighting a return to typical market behavior after a period of uncertainty.

Demand for Large Deals increases

Demand for larger office deals – those valued at $100 million or more – has risen sharply, increasing by approximately 130% in the first half of 2025 compared to the same period in 2024. This trend is linked to increased institutional appetite for premium office spaces and improved availability of debt financing.

Here’s a comparative snapshot of office market trends:

Metric	H1 2024	H1 2025	Change
Total Transaction Volume	$18.2 Billion	$25.9 Billion	+42%
JLL Sales Volume	N/A	110% Increase	–
Bid Volume (Q2)	N/A	$16 Billion	Highest Since Q2 2022
Large deal Demand (> $100M)	N/A	+130%	–

Flight to Quality and Limited New Supply

The current market favors high-quality office buildings, experiencing the bulk of the new demand.As these spaces fill,demand is expected to broaden to secondary buildings,possibly leading to greater rental rate increases and absorption over the next five years.Simultaneously, new office construction remains limited, with only 6 million square feet scheduled for delivery next year – a 90% decrease compared to the four-year average following the 2008 financial crisis.

Did You Know? The dwindling supply of new office space, coupled with increased demand, could create a significant advantage for landlords in the coming years.

The Impact of Reduced inventory

The shrinking office inventory is further influenced by the adaptive reuse of older buildings – conversion to residential, hospitality, or storage facilities – reducing the overall supply. Distressed properties, particularly those trading at significantly reduced prices, are attracting bargain hunters. This creates a “barbell effect,” where demand is concentrated at both the high and low ends of the market.

Stabilizing Downsizing and REIT Performance

Company downsizing has begun to stabilize, with businesses now reducing office space by an average of just 3% when relocating – a significant decrease from the nearly 20% reduction seen in 2022. Publicly traded office REITs, including BXP, Vornado, and SL Green, have seen their stock prices rise in the last six months, although Alexandria Real Estate Equities continues to face challenges.

Pro Tip: Investors should carefully assess the quality and location of office properties, focusing on buildings that cater to the evolving needs of modern businesses.

Will the momentum in the office market continue as economic uncertainties loom? What innovative strategies will landlords employ to attract and retain tenants in this evolving landscape?

Looking Ahead: Long-Term Trends in the Office Market

The office market’s recovery, while encouraging, remains subject to broader economic conditions. Geopolitical risks and potential economic slowdowns could impact tenant demand.Though,the essential forces driving the recovery – limited new supply,rising investor confidence,and a “flight to quality” – suggest a positive long-term outlook. The key will be adapting to the hybrid work model and creating office spaces that offer compelling amenities and experiences.

frequently asked Questions about the Office Market Recovery

• What is driving the recovery in the office market? Lower interest rates and increased investor confidence are significant drivers.
• What types of office properties are most in demand? High-quality, modern office buildings are currently the most sought-after.
• Is there a lot of new office space being built? no, new construction is at a historically low level, contributing to supply constraints.
• What is the “flight to quality” phenomenon? It refers to the trend of tenants prioritizing premium office spaces with better amenities.
• How are interest rate changes affecting office investments? Lower rates make investments more accessible and attractive to investors.
• Are REITs performing well in the current market? Some office REITs have seen their stock prices increase, but performance varies.
• What is the future of office space with the rise of remote work? Hybrid work models will likely become the norm, requiring offices to adapt their spaces and offerings.

Share your thoughts on the office market’s rebound in the comments below!

What specific factors contributed to the 18% increase in global office investment volume in H1 2025, according to the JLL report?

H1 2025: A rebound for Commercial real Estate Investment?

A recent report from JLL indicates a surprising surge in investor demand for office properties during the frist half of 2025. this marks a notable shift from the downturn experienced in late 2024, fueled by economic uncertainty and the rise of remote work. The JLL report highlights a global investment volume increase of 18% compared to H2 2024, signaling renewed confidence in the commercial real estate market. This uptick is particularly noticeable in gateway cities and properties undergoing significant repositioning.

Key Findings from the JLL Report

The JLL analysis pinpoints several factors driving this renewed interest in office investments:

* Stabilizing Interest Rates: A perceived plateau in interest rate hikes has removed some of the hesitancy among investors. This allows for more accurate financial modeling and reduces the risk associated with financing large-scale commercial property acquisitions.

* Flight to Quality: Investors are increasingly focused on Class A office buildings in prime locations. These properties, offering modern amenities and sustainability features, are proving more resilient to the challenges posed by remote work. Demand for premium office space is driving up valuations in key markets.

* Repositioning Opportunities: Distressed assets and older office buildings are attracting investors looking to capitalize on repositioning opportunities. Converting outdated office space into residential units or mixed-use developments is a growing trend. This represents a significant prospect for value-add real estate investments.

* Strong Fundamentals in Select Markets: Certain markets, like london, New York, and Tokyo, continue to demonstrate strong fundamentals, including limited supply and high occupancy rates in prime locations. These markets are attracting significant foreign investment in office properties.

Regional Variations in office Investment

The JLL report reveals distinct regional trends in office market investment:

* North America: Saw a 15% increase in investment volume,driven primarily by activity in Sun Belt cities like Austin and Miami. The demand for flexible office space is particularly strong in this region.

* Europe: experienced a 22% surge in investment, with London and Paris leading the way. ESG (Environmental,Social,and Governance) factors are playing an increasingly important role in European commercial real estate.

* Asia-Pacific: Recorded a more modest 10% increase, with Tokyo and Singapore remaining the most active markets. Real estate investment trusts (REITs) are playing a key role in driving investment in this region.

The Role of ESG in Attracting Investment

Environmental, Social, and Governance (ESG) considerations are no longer a niche concern but a central driver of commercial real estate investment decisions. Investors are increasingly prioritizing buildings with strong sustainability credentials, such as LEED certification and energy-efficient systems.

* Reduced Operating Costs: Green buildings typically have lower operating costs, making them more attractive to tenants and investors.

* Tenant Demand: Many corporations are actively seeking office space in sustainable buildings to meet their own ESG goals.

* Regulatory Pressure: Governments around the world are implementing stricter regulations on building emissions, further incentivizing investment in green buildings.

This focus on ESG is creating a two-tiered market, with older, less sustainable buildings struggling to attract investment. Sustainable office buildings are commanding premium valuations and attracting a wider pool of potential buyers.

Impact of Hybrid Work Models on Office Demand

While the rise of hybrid work models continues to present challenges for the office sector, the JLL report suggests that the impact is becoming more nuanced.

* Right-Sizing Strategies: Companies are re-evaluating their office space needs and adopting right-sizing strategies. This often involves consolidating multiple offices into fewer, higher-quality locations.

* Focus on Collaboration Spaces: The demand for conventional office space is declining, while the demand for collaborative spaces, meeting rooms, and amenities is increasing.

* Amenity-Rich buildings: Buildings offering a range of amenities,such as fitness centers,restaurants,and childcare facilities,are proving more attractive to employees and tenants.

The report emphasizes that the office is not dead, but it is evolving. The future of the office will be defined by adaptability, collaboration, and a focus on employee experience. future of work trends are directly impacting investment strategies.

Practical Tips for Investors in the Current Market

For investors looking to capitalize on the current opportunities in the office market, JLL recommends the following:

1. Focus on High-Quality Assets: Prioritize Class A buildings in prime locations with strong tenant profiles.
2. Explore Repositioning Opportunities: Consider investing in distressed assets or older buildings with potential for redevelopment.
3. Prioritize ESG Factors: Focus on buildings with strong sustainability credentials and a commitment to ESG principles.
4. Conduct Thorough due Diligence: Carefully assess the