Office conviction climbs in SitusAMC survey

Office is no longer the asset class with no friends. SitusAMC's ValTrends quarterly survey, shared exclusively with Commercial Observer ahead of its release, put investor preference for office transactions at 11 percent in the second quarter. That is up from 4 percent in early 2025, though down from 16 percent in the first quarter. Peter Muoio, head of SitusAMC Insights, reads the pattern as an upswing after years of sentiment in the low single digits. The survey asks investors to name the property type with the most opportunities; office has spent most of the last few years barely registering.

Muoio attributes the renewed interest to more clarity on valuations and to pressure on some distressed debt. He also cites what he calls "growing optimism" about the financial feasibility of office conversions. The report's cap-rate data gives that optimism a hook: office cap rates tightened 10 basis points in the second quarter, but they remain 80 basis points above their long-term average. The discount is narrowing, not gone.

Muoio noted that office investment conditions have been improving for the past year to a year and a half. The latest survey is part of a broader realignment: investor preference across property types is more evenly split than it was a year ago.

Multifamily remains the top-ranked asset class, but its preference share dropped to 36 percent from 60 percent quarter over quarter. Muoio says the drop likely reflects Sun Belt oversupply that is taking longer to resolve than investors hoped. Industrial climbed 16 percentage points to 32 percent, landing in second place, though that remains below the 35 percent it drew a year earlier. The quarter-over-quarter move is a snapback, not a new high.

Jen Rasmussen, SitusAMC vice president and co-author of the report, says much of the industrial enthusiasm is tied to expected data-center demand from AI. She cautions that data centers now carry significant risk, with pushback mounting and a recent moratorium in New York serving as an example. Survey enthusiasm, in other words, is not deployed capital.

For private-market allocators, the quarter offers a direction of travel. Office has been the sector everyone wanted to be free of; an 11 percent reading with a 10-basis-point cap-rate tightening suggests the beginning of a clearing price. The test will come in the next several quarters, when conversion projects either find financing or don't. If they do, the money that rotated out of office during the downturn has a plausible path back. If they don't, office stays a value conversation without a bid.