In this edition of The Chief Economist, BGO’s Ryan Severino revisits the office sector—one of the most misunderstood property types in commercial real estate. While demand for office space softened in 2025 due to policy-driven economic uncertainty, BGO notes that conditions are stabilizing as uncertainty eases heading into 2026. Office-using employment growth was muted last year, but prospects are improving, and medical office buildings (MOB) continue to stand out as a structural bright spot. Supported by demographic trends and expanding healthcare employment, MOB vacancy remains well below that of traditional office space.

On the supply side, BGO highlights meaningful progress toward equilibrium. New office construction has slowed significantly, while obsolete and uncompetitive buildings are increasingly being removed through conversions and demolitions. This gradual right-sizing is improving overall inventory quality and helping stabilize vacancy and rent levels. While challenges persist—particularly for older assets—BGO emphasizes that office performance has consistently exceeded very negative expectations since the pandemic. For investors, the message is clear: caution is warranted, but outright inaction may be a mistake. With disciplined asset and submarket selection, BGO sees credible, long-term opportunities emerging in a sector that is evolving rather than disappearing.

Read the full article here: Office Misunderstood