After years of empty-desk headlines, some office landlords are getting their bargaining power back. Companies are competing for modern space in major cities as AI firms expand and employers tighten attendance policies. Years of weak construction have added to the squeeze.
Prime offices regain pricing power
Manhattan is leading the recovery, with startups, AI firms, and large employers chasing the same top-tier buildings. Only 19.7M square feet of office space is now under construction nationwide.
The shrinking pipeline gives select REITs a better shot at raising rents and filling vacant floors. REITs own property portfolios and distribute much of the income they collect to shareholders. Office names were hit hard after 2020 as remote work emptied buildings and weakened rent rolls.
Tenants are now paying up for newer offices with better amenities, modern layouts, and easy transit access. Older commodity buildings continue to struggle, and some may eventually need to be converted or demolished.
SL Green Realty owns trophy properties across New York, placing it near the center of the city’s leasing rebound. BXP owns offices across Boston, New York, Los Angeles, San Francisco, Seattle, and Washington, DC.
“It’s a landlord’s dream come true.”
Alexander Goldfarb, Piper Sandler
A broad office bet can still hide plenty of weak properties. The landlords gaining ground are the ones with buildings that companies actively want, rather than space they will accept simply because it is cheap.
Worker visits are uneven
Office attendance is also improving, with visits up 6% during the first half of 2026 from a year earlier. New York, Miami, Dallas, and Atlanta are now closest to their prepandemic levels.
West Coast markets recorded the fastest growth after enduring some of the sharpest declines since 2020. Hudson Pacific Properties has rallied this year as leasing improved in San Francisco and the Pacific Northwest.
Hudson Pacific signed a 502K-square-foot lease with San Francisco in June, marking the city’s largest office lease since 2018. SL Green raised its funds-from-operations guidance the following month. FFO measures the cash generated by a REIT’s properties and is commonly used instead of standard earnings.
The better buildings are filling up first, which gives their owners more say over rents and lease terms. Anyone buying into the recovery should look closely at the location, age, and leasing record of the properties inside each REIT.
AI demand broadens exposure
AI spending is pulling more corners of real estate into the trade. Models run inside data centers that consume huge amounts of power, and the facilities are often backed by long leases from large technology companies.
That demand has lifted Equinix this year as businesses spend more on AI infrastructure. Digital Realty Trust has also built considerable scale, with more than 300 data centers across over 30 countries.
The connection is less obvious at Welltower. Its senior housing business benefits from an aging population, while AI is helping the company manage its properties and operations more efficiently.
Investors who want all three can buy them through a fund. The iShares Core US REIT ETF holds US real estate stocks and charges 8 basis points. The First Trust S&P REIT ETF also owns Welltower, Digital Realty, and Equinix as part of a larger REIT portfolio.
A fund reduces the damage any single stock can cause, though its weightings shape the bet. Heavy positions in data centers and healthcare leave less room for office landlords to move the overall return.
Valuation sets the bar
A July valuation screen identified several REITs trading below their estimated value, including Crown Castle, SBA Communications, American Tower, Park Hotels & Resorts, BXP, and Kilroy Realty.
Putting tower operators, hotels, and office landlords on the same list shows how broad the REIT market has become. Apartments, cold storage, and healthcare properties add even more variety, with each business responding to its own set of economic pressures.
Crown Castle now concentrates on US wireless towers after selling its fiber business in May 2026. American Tower operates roughly 150K towers across several regions.
Residential REITs bring a separate set of drivers. Invitation Homes owns more than 86K rentals, while Equity Residential has over 85K apartments in coastal urban markets.
Lower rates can push valuations higher across all these groups. Rent growth and occupancy still depend on demand for each property type, which is where their performance begins to separate.
Data centers led returns
The strongest results over the past decade came from US-focused REIT funds. Within the US market, data-center REITs led individual property groups with a 13.75% annualized return.
Their record helps explain why AI spending has drawn so much money into the group. It also means investors are paying for a story that already has years of strong returns behind it.
Office stocks carry lower expectations after spending years below their prepandemic levels. Prime buildings are now gaining tenants as new supply dries up, giving a few landlords room to surprise investors.
A focused watchlist may work better than buying office REITs across the board. Leasing activity at SL Green, Hudson Pacific, and BXP can show whether the recovery is reaching individual portfolios, while an ETF provides income from the wider property market.
Higher rents and stronger FFO guidance would give investors clearer proof that landlords are making money from the shortage of prime space.