Surge in Owner-Occupier Deals Reshapes U.S. Office Market

In recent months, a notable trend has emerged within the U.S. office sector: a surge in owner-occupier deals. According to the Urban Land Institute (ULI), this uptick is largely a reaction to declining property values, tighter capital availability, and a broader economic downturn.

A Shift to Ownership: The Numbers

As businesses adapt to shifting market conditions, many tenants are transitioning from leasing to buying office spaces outright. Here’s a closer look at the statistics driving this change:

• 20% of total U.S. office sales in Q1 2025 involved tenant acquisitions, up from 15% in 2024.
• Before the pandemic, owner-occupier deals made up 8% or less annually.
• 76% year-over-year increase in bid activity from tenants recorded by JLL in 2024.

Mike McDonald, Senior Managing Director at JLL, states, “With this year’s owner-occupier transaction volume already above 2024’s total, user acquisitions are expected to remain a major force in the office market through 2025.”

Case Study: Los Angeles County’s Gas Company Tower Acquisition

A high-profile case showcasing this trend is the Los Angeles County acquisition of the Gas Company Tower in downtown L.A. The county was seeking alternatives to expensive seismic retrofits on leased properties and found a promising solution in the modern Gas Company Tower.

Key Acquisition Highlights:

• $200 million purchase price, significantly lower than its prior valuation of $632 million.
• The property had gone into receivership after a Brookfield-managed fund did not extend its $784 million loan.
• The county’s transition is projected to save hundreds of millions in long-term costs, as the modern structure requires less retrofitting.

Carl Muhlstein, a prominent real estate broker, noted, “It would’ve cost the county $1,500 a foot and years to rebuild its outdated, seismically vulnerable office spaces. Instead, they bought a tower for less than $200 a foot that needs some work, but how do you argue with that these days?”

The Advantages of Ownership for Businesses

For many organizations with stable growth or specific operational needs, ownership is becoming the preferred strategy. Here’s why:

• Control: Organizations gain more control over their environment.
• Optimization: Ownership allows for customization to meet specific operational needs.
• Long-Term Presence: Companies can secure their long-term foothold in competitive markets.

Factors Driving the Owner-Occupier Trend

Several key factors are propelling this wave of owner-occupier transactions:

1. Market Reset: With many office buildings selling below replacement costs, the market presents opportunities for savvy purchasers.
2. Improved Visibility: Tenants gain better insights into their space requirements, boosting confidence in making long-term commitments.
3. Access to Capital: Tenants can secure funding at corporate lending rates, often lower than those available to traditional investors.

A New Demographic of Buyers

Post-pandemic, the landscape has evolved. While tech companies previously dominated tenant acquisitions, a diverse range of new buyers is emerging:

• Government Entities: Includes counties and cities looking for strategic real estate investments.
• Educational Institutions: Universities and colleges eyeing property ownership.
• Healthcare Organizations: Facilities aiming for stability in uncertain times.

Navigating the Owner-Occupier Sales Process

For brokers, navigating owner-occupier sales presents a blend of challenges and opportunities.

Pros:

• Tenants have existing familiarity with the property, reducing the sales pitch burden.

Cons:

• While knowledgeable about their needs, tenants may lack real estate transaction experience, necessitating additional guidance.

McDonald reflected, “There’s a little bit more hand-holding on our side, which can be advantageous to our clients. But it does require more work.”

Conclusion

As the U.S. office market continues to evolve, the rise in owner-occupier deals signals a shift toward long-term investment strategies. With favorable pricing and changing operational needs, organizations are increasingly seeing the value of owning the spaces they occupy.

For more insights into the transforming office sector, consider exploring resources on Commercial Real Estate Trends and Urban Development.

This article provides a comprehensive overview of the trends in owner-occupier office transactions, showcasing how businesses are adjusting their strategies in response to current economic conditions.