For decades, office leasing decisions followed a familiar checklist: location, rent, amenities and layout. Today another factor increasingly sits near the top of that list: capital stability.
In a market where asset values are still adjusting and refinancing risk remains uneven, tenants are increasingly evaluating the financial strength of a building before committing to long-term leases. The question is no longer simply whether a space works today, but whether the property will remain competitive throughout the lease term.
That shift reflects the broader financial landscape facing the office sector.
According to data from MSCI, distressed commercial real estate assets totaled roughly $130.3 billion at the end of 2025, with office representing $62.9 billion of that total—far more than any other property type. At the same time, Trepp reports the CMBS office delinquency rate hovering around 12%, underscoring the refinancing challenges still facing parts of the sector.
Those numbers may feel abstract to investors. For tenants signing seven- or ten-year leases, however, they are highly practical. Committing to a building increasingly means evaluating how that asset will evolve over the life of the lease.
A Market Still Repricing
Sales data helps explain why tenants have become more cautious. According to Yardi Matrix, the average U.S. office building traded for about $182 per square foot in 2025, a 6.1% increase year over year but still roughly 33% below pre-pandemic levels. That headline number masks a much wider dispersion beneath the averages.
Nearly 45% of office assets sold at discounts compared with prior transactions, including several extreme repricing events. In one example, a suburban Chicago office building sold at a 96% discount relative to its 2012 sale price.
Those kinds of price resets signal that the market is still recalibrating and that ownership structures can change quickly. For tenants, that uncertainty increasingly factors into leasing decisions.
Companies are asking questions that once belonged mostly to lenders and investors: How much capital will be invested in the property? What happens when the loan matures? Will ownership change?
Capital Determines Competitiveness
The answers matter because office buildings now require ongoing reinvestment to remain competitive.
Workplace expectations have evolved. Tenants returning to the office expect modern amenities, flexible floorplates, upgraded infrastructure and collaborative spaces that support hybrid work patterns. Delivering those improvements requires capital, and often in a financing environment where lenders remain cautious toward office assets.
The development pipeline illustrates how limited that capital has become. Yardi Matrix reports only about 28.9 million square feet of office space under construction nationwide, equal to just 0.4% of total inventory. Meanwhile, CommercialCafe’s pipeline data shows roughly 42 million square feet delivered in 2025, down significantly from earlier cycles.
With new development largely stalled, the competitiveness of many office buildings will depend on how existing assets are upgraded and repositioned.
Tenants understand this dynamic. In many cases they are evaluating not only the space itself, but the owner’s ability to keep investing in the property over time.
The New Tenant Calculus
Leasing activity itself has begun to stabilize. CoStar reports approximately 12.5 million square feet of positive net absorption in 2025, the first annual gain since before the pandemic.
But demand remains highly selective. Tenants are consolidating into fewer buildings while upgrading quality. The result is a market where capital investment increasingly separates competitive buildings from those struggling to attract tenants.
In previous cycles, tenants could assume that most office buildings would remain viable throughout the life of a lease. Today that assumption requires a closer look at ownership, financing and long-term investment plans.
In the next phase of the office cycle, the most important amenity a building may offer may not be a fitness center or rooftop terrace. It may simply be a landlord with the capital to keep improving the property.
