Dawn Lim of Yahoo! Finance reports that Blackstone President Jon Gray declared that the office market has bottomed out, signaling a potential rebound after valuations plunged 50%-70% from their peak. Despite Blackstone’s previous retreat from office properties—now comprising less than 2% of its real estate holdings—Gray suggested the firm is reconsidering office investments, including a possible Midtown Manhattan acquisition.

Peter Grant of the Wall Street Journal highlights that investors are returning to the U.S. office market, seizing opportunities in discounted high-end buildings, distressed properties, and office-to-residential conversions. Office sales rose 20% in 2024 to $63.6 billion, with major players like Norges Bank making their first U.S. office deals since 2018. Leasing activity is picking up as more businesses bring employees back. Despite high vacancies and lender hesitancy, premium office properties in strong markets are seeing rising rents and renewed investor interest.

Source: WSJ (February 2025)

“It marked the first increase since 2021. And with a lot of cash sitting on the sidelines, brokers expect sales activity to continue to accelerate in 2025. Opportunistic real-estate funds had $196.8 billion available at the end of last year, up from $179.9 billion at the end of 2020.”

That said, Erik Sherman of Globe St reports that the Trump administration may direct the GSA to sell government buildings and cut office leases, potentially removing 53 million square feet (35.5% of GSA-leased space) by 2028 and reducing annual rent payments by $1.87 billion. A Trepp analysis estimates a $7.4 billion market value loss if 50% of leases are terminated. Washington, D.C., the most affected metro, could see nearly 10 million square feet vacated. 

We are, however, seeing several local markets stabilizing, according to multiple reports:

Nick Romito of Boston Real Estate Times comments that New York City leads the office demand recovery, surpassing pre-pandemic levels with a 25.3% year-over-year growth driven by tech and finance. The VTS Office Demand Index (VODI) hit 94 in Q4, briefly topping 100 in November. San Francisco saw the highest annual growth at 32.4%, fueled by tech’s return to offices. Chicago and Seattle also showed steady gains, reflecting a shift toward hybrid work models.

Mike Boyd of ConnectCRE reports that Denver’s office market showed signs of stabilization in Q4 2024, with 167,000 square feet of positive net absorption and vacancy holding at 24.9% per CBRE. Sublease availability fell 4.2% year-over-year, while leasing hit 1.2 million square feet, led by tech. Investment activity rebounded with 19 deals totaling $277.4 million. Despite ongoing challenges, the market outlook remains cautiously optimistic for 2025.

Tariff impacts

Various media outlets now report that the Trump Administration has agreed to pause tariff actions on Mexico and Canada for 30 days. That said, there have been several reports on the potential impact on housing these tariffs could have, beginning with Chen Zhao of Redfin, who notes that:

• Higher tariffs are inflationary and likely to lead to higher mortgage rates for longer, but how much higher and how much longer depends on a slew of details.
• A substantial portion of U.S. building materials are imported from Canada. The proposed tariffs are expected to raise the cost of these materials, leading to higher expenses for home construction and renovations.
• Depending on the extent of retaliation from Canada, Mexico, and China, tariffs are also likely to reduce economic growth. Estimates vary and depend on the specifics of the policy, but the US economy has already been gradually weakening under the strain of high interest rates.
• In general, the more difficult it is to substitute away from the goods that are being tariffed, the higher the likelihood that prices will broadly increase.

Elizabeth Findell and Gina Heeb of the Wall Street Journal report on the tariffs and their impact on construction, noting that they would drive up construction costs, with key materials like softwood lumber, steel, cement, and gypsum heavily reliant on these trade partners. Lumber from Canada already faces a 14.54% tariff, and steel imports—25% of which come from Canada—would see further cost increases. Builders warn these tariffs, combined with labor shortages from stricter immigration policies, will inflate home prices at a time when affordability is already strained.

The National Association of Home Builders (NAHB) released a statement on the tariffs:

“The 25% tariff on softwood lumber products from Canada is in addition to an effective 14.5% duty rate already in place, meaning that the overall effective Canadian lumber tariffs will rise to nearly 40%. For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability. In effect, the tariffs act as a tax on American builders, home buyers and consumers. NAHB will continue to seek a tariff exemption for building materials. And we will actively engage with policymakers to reduce regulatory burdens and eliminate other obstacles that are preventing builders from constructing more attainable and affordable housing.”

Jason Lalljee of Axios reports on the impact on household incomes, citing a study that found that the proposed tariffs could cost U.S. households an extra $830 annually and shrink economic output by 0.4%. The tariffs—25% on Canada and Mexico and 10% on China—would add $1.2 trillion in taxes by 2034. Past tariffs from both Trump and Biden have already raised prices, lowered employment, and hurt economic growth.

Rents

Zumper released its January Rent Report showing a stable start to 2025 prices, with one-bedroom rents down 0.3% to $1,534 and two-bedrooms up 0.1% to $1,907. New York City remains the priciest market, while San Francisco reclaimed its No. 2 spot, surpassing Jersey City. Los Angeles hit a record-high one-bedroom rent of $2,520, though new supply is expected in 2025. National rents are steady, but demand will increase in prices in the coming months.

Source: Zumper (February 2025)

“On an annual basis, national rents for one and two-bedroom units have grown 2.5% and 3.2%, respectively, aligning closely with the latest U.S. annual inflation rate of 2.9%—the highest since July 2024. The steady annual growth reflected in the Zumper National Rent Index, coupled with persistent inflationary pressures, indicates that further rate cuts by the Federal Reserve are becoming increasingly uncertain.”

Similarly, Apartment List released its National Rent Data Report, highlighting that the rental market started 2025 with its sixth consecutive monthly decline, as rents fell 0.2% in January, bringing the national median to $1,370. Year-over-year rent growth remains negative at -0.5%, though trends suggest a return to positive territory. Vacancy rates hit a record 6.9% amid a supply boom, with 800,000 new units still in the pipeline. Sun Belt cities like Austin, Denver, and Raleigh saw the steepest annual declines due to rapid multifamily expansion. Seasonal demand is expected to push rents upward in the coming months.

Source: Apartment List (February 2025)

“While rent growth has been continuing to follow its typical seasonal pattern, the pricing cooldown of the current off-season has outweighed the price increases of last year’s busy season, such that year-over-year rent growth is currently negative at -0.5 percent. This marks the third consecutive winter in which seasonal discounts have been notably sharper than the pre-pandemic norm.”

Rentometer released a report recently showing single-family rent growth slowing dramatically in 2024, rising just 0.8% to an average of $2,357—the smallest increase in years. Vacancy rates hit a 26-quarter high of 6%, pressuring rents downward, especially in build-to-rent-heavy Sun Belt markets like Austin and Tampa. The Midwest saw the fastest rent growth (+5.26%), while expensive coastal cities like San Francisco ($5,265) and Newport Beach ($7,316) continued to dominate the high-cost rankings. This shift signals a cooling rental market after years of rapid price hikes.

Source: Rentometer (February 2025)

Finally, Skylar Olsen of Zillow reports on their data showing rent growth softening in December, rising just 3.4% year-over-year to $1,965—below the pre-pandemic norm of 4%. Single-family rentals drove much of the increase, up 4.4% to $2,174, while multifamily rents rose just 2.4% amid a surge in new apartment construction. Concessions hit a record high, with 40% of listings offering incentives, signaling rising vacancies. Cities like Denver, Austin, and San Antonio saw rents decline, and more metros may follow as multifamily supply expands in 2025.