Institutional Investors Are Following Each Other Back Into The Office Market
Big investment giants like SL Green and BXP are wading back into the office market, and more are expected to follow in their wake.
Office investment sales reached $20.5B in the first quarter of 2026, a 38.6% increase from the same time last year, according to the latest Avison Young report.
That volume was bolstered in part by big purchases by institutional giants and large publicly traded companies. Those players pulled back from the volatile office sector in recent years but, given stabilizing fundamentals, are now confident enough to start coming back in.
“What's exciting now to see is that the institutions are getting back into the market,” James Nelson, Avison Young's head of U.S. investment sales, told Bisnow.
Investment sales are on pace to be the best year for institutions since the market’s low point in 2023. Year-to-date, institutional investors paid $7.1B for office properties, according to Avison Young, nearly equal to the full year for 2023.
REIT investment year-to-date, which stands at a $3.3B transaction volume, has already outpaced the full year in 2023, which was $1.9B, and is just below the annual volume last year, $3.6B.
New York City, the financial capital of the world, is one of the places where the shift is happening.
In January, SL Green Realty Corp. closed on 65 E. 55th St. for $730M. In April, Vornado Realty Trust took a 49% stake in Park Avenue Plaza, valuing the building at $1.1B.
Those deals followed a rapid ramp-up in giant office investment sales during the second half of last year, including RXR and Elliot Investment Management’s $1.1B purchase of 590 Madison Ave. in August and Norges Bank Investment Management and Beacon Capital Partners’ September acquisition of 1177 Sixth Ave. for $572.3M.
The fact that these types of investors are back in the game is encouraging their peers to follow suit, Nelson said.
“It gives confidence to other institutional investors to step into the market, so they're leading the way,” he said.
Institutions and REITs aren’t as nimble as the private players that have been dominating the market post-pandemic. They need to answer to bureaucratic bodies like investment committees that tend to scrutinize transactions with a risk-averse lens.
And for the past few years, since the pandemic upturned the office world, investments in that asset class largely haven’t met that level of safety.
But that’s starting to change.
“Return-to-work efforts have gone up, leasing has shown signs of life, obviously, AI has acted as a tailwind in that regard, rents have increased in the trophy space,” said Alex Ern, senior manager for U.S. capital markets, market intelligence at Avison Young. “Fundamentals have become clear. It's a lot clearer what's functionally relevant as an office building now versus what is not than it was a few years ago.”
These institutions aren’t just buying, they’re starting to build new trophy office, further signaling that the office sector is passing muster with those investment committees.
BXP has two 320K SF ground-up office projects planned in Washington, D.C., for law firm anchors, expected to deliver in 2028 and 2031. In New York, the REIT is building a 930K SF office building above Grand Central Terminal.
“They're a public REIT, so if they're surviving Wall Street scrutiny as it relates to their returns that they're building to, clearly the economics are making sense,” Ern said. “They're not out here building to some absurd return on cost, because if they were, Wall Street would skewer them for it, and they're not.”
Avison Young is tracking over 10M SF of new office development underway in Manhattan, Nelson said.
“Clearly, that's showing more confidence in the market,” he said. “You're going to see the institutions get off the sidelines.”
