Connect CRE: Office Recovery in 2026 Hinges on Asset Quality and Location

Connect CRE reports that the U.S. office sector is entering 2026 with gradual improvement marked by uneven demand, slower construction, and performance that varies by asset quality and location. Industry sources describe a market that has moved past steep declines in occupancy and absorption, with stabilization emerging in select markets and prime assets.

Feasibly Founder & CEO Brian Connolly noted that a rebound in demand during the second half of 2025 helped halt a multi-year decline in national occupancy. He also pointed to elevated vacancy, rising operating costs, and refinancing pressure as ongoing constraints, particularly for older and lower-quality buildings. Connolly added that distress tied to debt maturities and CMBS delinquencies remains a defining factor as owners assess recapitalization, conversion, or disposition strategies.

The coverage emphasizes that office performance in 2026 will hinge on geography, asset quality, sponsor strength, and the ability to adapt to hybrid work patterns, selective capital availability, and tenant demand for higher-amenity environments.

📸: Photo by Andra C Taylor Jr on Unsplash