US Office Market Report: Higher rates, lower valuations spur fierce headwinds

Investors remain skeptical of the office market and continue to trade office REITs at vast discounts to their net asset value (NAV) estimates. Similarly, low valuations have pushed the median implied capitalization rate for the office REIT sector to its highest level in more than 20 years.

Price discovery remains limited, with office transaction volume down more than 60% in most major markets.

Banks are preparing for rough sledding, having built reserves to high single-digit percentages on loans tied to office properties.