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.

“Tailwinds are emerging, which support a broader recovery in the office sector, supported by the expansion of return to office mandates, moderation of downsizing rates in office leasing activity and liquidity improvements for office sales and financing.”

JLL pointed to positive office trends during a recent Q1 2025 call as a factor in their future performance. CEO Christian Ulbrich noted that as office-using firms gain more clarity on future space needs and development pipelines remain low, fundamentals and trends are likely to continue to strengthen for top-tier office buildings and buildings a tier down from the top as flight-to-quality spillover demand occurs in tighter markets.

“Asking rents for Premier workplaces continue to be more than 50% higher than the broader market.”

BXP’s CEO and Chairman, Owen Thomas, notes in the opening of the BXP Q1 2025 call that the ‘Premier Workplaces” (highest quality 7% of all buildings as defined by CBRE) continue to materially outperform the broader office market in vacancy, absorption, and rent increase metrics. BXP is seeing this dynamic in their high quality portfolio, however, it is important to note the unique market by market leasing dynamics mentioned on the call; a reminder that understanding the nuances of each market (and submarket) is important for success in leasing.

“Sublease space is no longer pushing overall vacancy upwards, as the national inventory of sublease availabilities has declined each of the past four quarters.”

Cushman & Wakefield’s Q1 U.S. Office Report notes the decrease in sublease space. As sublease space is typically seen a precursor of overall vacancy, the fact that sublease space is decreasing supports the notion that demand is stabilizing for office.

Charts We Are Talking About

In their Q1 office report, Savills uses the framework below to give projections about office trends, all of which seem to be in favor of high quality office: decreasing inventory, increasing rental rates (for Class A), and decreasing vacancy. Savills does find it important to note: “We are not returning to the office of the past. Today’s office has been redefined – both in purpose and in design”. Not all office assets fit the bill for today’s tenant desires, but those that position themselves will be poised for operational success.

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