An executive order mandating that federal employees return to the workplace has sparked speculation of a 2025 recovery for the US office market
Countless workplaces across the US shuttered their doors at the onset of the COVID-19 pandemic, with commercial demand for office space tumbling as millions of Americans switched to remote working in a seismic shift for the national workforce.
But in one of his first acts after reclaiming the presidency last week, Donald Trump mandated that all federal employees return to the office – and other employers are also putting the squeeze on remote working, potentially breathing new life into a still-slumping office market.
That charge has been led by Elon Musk, who blasted work-from-home arrangements as a “COVID-era privilege” in a Wall Street Journal opinion piece penned alongside Vivek Ramaswamy, his (now-departed) co-head of the Department of Government Efficiency (DOGE).
A wider scaling back of remote working might boost prospects for the office market this year – but don’t expect a rapid resurgence, Eastern Union co-founder and president Abraham Bergman (pictured top) told Mortgage Professional America.
That sector remains a “struggle” for lenders and brokers alike, he said, with certain lenders still giving any proposal in the space a wide berth. Others are considering options on a deal-by-deal basis but not actively chasing a larger office portfolio.
One emerging trend in the space is growing appetite among companies to cater to their workforces and lease space in various suburban markets where employees are located, rather than requiring everybody to return to a lengthy commute into the center of a major city.
“Although we had this idea of remote which seems to be going away slowly but surely – which is going to help the office space – you don’t necessarily have the idea of people wanting to come back to the commute,” Bergman explained.
“Maybe a company had 100,000 square feet in downtown and now they’re saying, ‘We have a bunch of people that live in this suburban market. We have a bunch of people that live downtown and a bunch of people that live in a different suburban market. So instead of having 100,000 square feet in the city, we’ll have three offices with 25,000 square feet each.’”
Peter Idziak, mortgage lawyer at Polunsky Beitel Green, weighs in on President Trump's recent executive orders aimed at lowering housing costs. https://t.co/vPKpu0FtFg
— Mortgage Professional America Magazine (@MPAMagazineUS) January 24, 2025
Class A office space demand on the up, Class C continues to slump
Demand for office space also varies depending on the category of the offering. Class A space – the highest-quality office buildings on the market – are much more attractive now than a few years ago, Bergman said, because there’s a chance to snag a deal in that sector.
But that’s also weighed against prospects for Class C office space, a generally inferior product type, because higher-quality product is available for lower costs.
“The likelihood is that Class A office buildings are going to be rented over the Class C buildings because there are options now and tenants can get themselves a deal,” Bergman said. “If I’m looking for a new space in downtown New York or Manhattan, I would obviously pick the nicest building that I can get at the price I’m willing to pay. And it’s more likely that I’ll get that today because rents have softened.
“Five years ago, pre-COVID, I would have had to settle for a B or B-minus building. I now have the opportunity to get into the A-minus building. The nicer buildings in those areas are getting leased up and they’re for the most part doing pretty well. It’s the other buildings that are not that well-maintained or are older that are having a little bit more of a struggle.”
Don’t expect the sudden return of five-day office weeks
US companies may be putting pressure on employees to return to the office – but about 68% of employers still offer flexibility to workers in their work location, according to the FlexIndex, and just a third require employees to spend five days a week at the office.
But even the continuing popularity of hybrid work arrangements would be a positive step for the US office market, according to Bergman, in helping lift some of the gloom that’s gathered around it in recent years.
“We’ve definitely seen an improvement in the office market and from speaking to office building owners, they do see fewer people working remote,” he said. “That doesn’t mean we’re going back to what it was beforehand – people will maybe choose three or four days a week in the office.
“Maybe there’ll be more shared workspaces in those offices because the businesses know they won’t have 100% of people in eery day, so there’s definitely going to be a long-lasting effect on the office space. But there’s a lot of optimism that it’s going to begin to improve.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.