Callahan Capital Partners - Office Real Estate Digest

Callahan Capital Partners is a real estate private equity firm and operator focused exclusively on the origination, acquisition and management of high quality office assets in select urban markets throughout the United States.

“The top 100 office leases of 2024 totaled 28.9 million sq. ft., up from 26.8 million sq. ft. in 2023.”

The largest 100 office leases last year grew from 2023, with the average lease size (288,834 sf) increasing by 8%. This data suggests office occupiers are feeling more comfort committing to larger spaces, and 84% of these occupiers have a strong preference for high quality space. Read more from CBRE here.

“The proportion of mostly in-person workers (working in person at least four days a week) doubled between our two samples (2023 and 2024) to 68 percent, from 34 percent.”

McKinsey Quarterly’s article on “Return to Office” reports most organizations are enforcing an in-person mandate. While being in-person in the office is not the key factor leading to productivity, encouraging a return to the office can improve the key factors of productivity with the right workplace environment: collaboration, connectivity, innovation, mentorship, and skill development.

“Today’s issuance is at a new basis, at a different interest rate environment, and it is, generally speaking, better-quality assets. That’s allowing us to see strong new issuance alongside elevated delinquency rates.”

After a bigger year of issuance in 2024, CMBS issuance is expected to continue its upward trajectory in 2025 with SASB as the leading loan form. While December 2024 reached an all-time high delinquency rate for office-backed CMBS debt (11%), there has been a handful of SASB issuances for high quality office assets already this year. Read more here.

Charts We Are Talking About

Top tier assets have continued to increase effective rent performance with steady growth in base rent and fewer concessions in 2024. This data is evidence that tenants are willing to pay a premium for top-tier buildings. Conversely, effective rents for lower-tier office buildings have steadily declined. Factoring in rising operating costs and increasing vacancy, lower quality assets are facing lower net operating incomes and have to reduce base rents further to attract tenants seeking cost-effective options. More from CBRE here.

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