Suburban office properties are the only segment of the U.S. commercial real‑estate market showing clear price gains, according to the latest MSCI report on commercial property performance.
Suburban office values rise while downtown towers lag
The MSCI RCA CPPI US data indicate that suburban office values increased 3% year‑over‑year in June, the strongest growth among major property types. By contrast, central business district (CBD) office prices posted a modest gain for the year but remain roughly 50% below their early‑2022 peak.
Overall, the MSCI National All‑Property Index rose 0.9% over the past year and 0.7% in the most recent quarter, translating to an annualized 2.6% increase. The modest rise reflects a market that is drifting upward rather than rebounding, as the Federal Reserve keeps policy rates raised under new chair Kevin Warsh.
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Higher financing costs have already been factored into many sectors, leaving investors to focus on relative performance by property type and location rather than on broad index movements.
Office market splits reveal divergent trends
Aggregate office prices are up 2.2% over the past year, but the sector is far from uniform. Suburban office values rose that rate year‑over‑year and 0.8% in the latest quarter. CBD office increased the same yearly gain with an identical quarterly increase.
Long‑term drawdowns differ sharply. CBD office prices sit 26.1% below their level three years ago and 45.6% below the five‑year mark, according to the CPPI table. Suburban office is down far less, with its index only 15% below the July 2022 peak, compared with a 50% gap for downtown assets.
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For buyers underwriting new deals, the math is shifting. The deeper discount on CBD assets appears to reflect ongoing structural pressure rather than a temporary mispricing. Suburban properties, meanwhile, show positive momentum and smaller cumulative losses, suggesting landlords have made progress on rents, occupancy and cap rates.
In past cycles, downtown office markets have often recovered after periods of stress, but the current environment—marked by persistent high rates—makes that pattern less certain.
Industrial, apartments and retail show mixed signals
Industrial properties, which delivered strong appreciation through 2024, posted a 0.4% year‑over‑year decline in June. Quarterly figures show a gradual slowdown: the industrial index fell 0.7% in Q4 2025, 0.4% in Q1 2026 and 0.1% in Q2 2026. This suggests the sector is easing off a historic high rather than entering a new downturn.
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Apartment prices fell 1.7% over the past year, marking a tenth straight month of annual declines, and dropped 1.2% in the quarter, an annualized pace of –4.8%. While the ten‑year gain remains near 49%, three‑ and five‑year figures are negative, indicating the sector is still correcting after years of being a growth engine.
Retail, long viewed as structurally challenged, behaved more like a mature cyclical asset. Prices were down 0.1% year‑over‑year but rose 1.4% in the quarter, annualizing to 5.7%. The sector appears to have already repriced, with local fundamentals now driving performance more than broad e‑commerce concerns.
In a market where the national index is barely positive and debt costs remain high, these relative gaps in pricing performance are likely to shape decisions on where new equity is deployed and which lenders are willing to meet borrowers halfway.
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