Callahan Capital Partners - Office Real Estate Digest

8/27/2025

Author

Callahan Capital Partners
August 27, 2025

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.

Here's a glimpse into what we are reading to shape our view on the evolving office market.

“In a market where trophy buildings have cut vacancy to 14.5% while nonprime space tops 19%, revamped vintage properties are closing the gap with hospitality-style amenities, fitness centers, upgraded lobbies and spec suites.”

With Dallas-Fort Worth on track to become the nation’s No. 3 metro by 2030, demand for upgraded space is set to rise. Well located 1980s and ’90s-era office buildings are proving they can still compete for leases if owners invest heavily in modernization. Landlords of these vintage assets are pouring capital into amenities, helping once-dated assets close the gap with newer Class-A space. Case in point: Piedmont Realty Trust’s Galleria Office Towers, landed nearly 140K SF of new leases after a $9M post pandemic refresh. Re-amenitized, well located Class-B buildings are thriving—pushing rents up nearly $3 over the past five years. Read more here.

“While the overall Chicago office market has been deteriorating, the newest buildings with the most attractive amenities have been drawing tenants away from older buildings.”

Transwestern’s Q2 2025 Chicago Office Market Index—tracking the 20 newest Class A towers in the CBD—reveals a direct vacancy rate of just 7.9%, dramatically lower than the 22.2% in the broader Chicago CBD. Demand is clustering in the newest, best buildings. Supply is limited in these high quality assets and leases are being signed.

“July 2025 seems to mark a meaningful [return to office] tipping point, with numerous markets making substantial progress toward pre‐COVID office foot traffic levels”

New York is leading the charge on return-to-office. Manhattan office foot traffic has now surpassed pre-pandemic levels, with July figures 1.3% above 2019 and vacancy in premium buildings near zero. While cities like Los Angeles and Chicago still lag behind, the momentum is clear: what’s happening in New York today is a preview of the office recovery trend that will follow elsewhere. Read more here.

Charts We Are Talking About

38% of occupier organizations surveyed by CBRE indicate they expect office attendance to increase from current levels. This figure is likely a result of more organizations continuing to enforce their attendance policies. Per the survey, large organizations were more likely to indicate expected growth in office utilization, while smaller organizations were more likely to indicate their usage is at steady state. Read the 2025 CBRE Americas Occupier Sentiment Survey here.

Feel free to share this newsletter. New subscribers can sign up HERE to be included on future Digest editions.

Questions? Thoughts? Want to connect? Please reach out to [email protected]