Office and Retail Find Their Footing Article originally posted on Globe St. on August 6, 2025 As we pass the midpoint of 2025, both the office and retail real estate sectors are showing signs of stabilization, albeit with distinct paths and pressures. While investor caution remains, strategic acquisitions and resilient demand are helping both asset classes find their footing in a recalibrated market. Office: Uneven Recovery, Opportunistic Buying The office sector continues to navigate a slow and uneven recovery. With tech demand remaining muted outside of AI-related requirements in select gateway markets, leasing activity has been largely driven by financial and professional services firms. Manhattan stands out as a leader in both pricing and deal volume, signaling that core markets are still drawing interest. As transactions continue to close at significantly reduced prices, a key question has emerged: are values truly declining, or simply recalibrating to a new normal? Whatever the answer may be, corporate users with long-term space certainty are stepping in, acquiring assets at discounted pricing, particularly in top-tier markets like Silicon Valley. Notable trades include Apple’s $500 million conversion of leased assets into owned properties and several high-profile deals in New York and Seattle. Meanwhile, distressed sales in cities like Chicago, Denver, and Charlotte highlight the ongoing challenges for underperforming assets. Retail: Resilience in the Right Places Retail, by contrast, has remained steady through Q2 2025, with performance diverging sharply by asset type. Grocery-anchored centers and long-term single-tenant, net lease properties are thriving, attracting strong investor demand. Regional malls, however, continue to struggle under the weight of store closures and tariff concerns. Despite these headwinds, experiential retail is showing resilience. Retailers like Dick’s House of Sports are expanding into mall environments, leveraging foot traffic to drive engagement. Major transactions, such as Starwood Property Trust’s $2.2 billion acquisition of a national NNN portfolio, underscore the appetite for durable, income-generating assets. Even as Chapter 11 activity from brands like Rite Aid and Joann continues to pressure occupancy, valuations have remained steady. Tenant quality and lease longevity, favoring assets with strong fundamentals continue to be the main focus for investors. Many investors have considered the soon to be vacant boxes an opportunity to refresh tenant line-ups and bring in new, in demand tenants. Tying It Together: Strategic Positioning in a Cautious Market Across both sectors, a common theme emerges: selectivity. Investors are not retreating, they’re recalibrating. Whether it’s corporate users acquiring discounted office space or REITs targeting grocery-anchored retail centers, the smart money is flowing toward assets with long-term viability and strategic positioning. External pressures, from valuation uncertainty to consumer spending risks, are shaping underwriting discipline and deal strategy. Yet, the uptick in transaction volume and the resilience of certain asset types suggest that both office and retail are on a path toward greater stability. Final Thoughts As H2 2025 unfolds, expect continued momentum in core and near-core trades, especially as funds rebalance and reposition. While challenges remain, the market is showing that discounted deals and durable demand can coexist, and that savvy investors are already capitalizing on the opportunity.