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The recovery in the U.S. office market has been gaining steam this year and may be set to accelerate. While vacancy rates and return-to-office employee volume have been focal points in gauging demand, a new look at interest in office from the capital markets points to an even stronger recovery than previously thought.

JLL, a global commercial real estate and investment management company, gave Property Play exclusive access to a limited distribution client report. It found that office transaction momentum strengthened significantly in the first half of this year, with total industry volume up 42% year over year to $25.9 billion.

Looking at JLL’s office sales transactions alone, volume was up 110% from the first half of 2024 to the first half of 2025, more than double the momentum of any other major property type, including data centers. 

The report notes that as we move through the third quarter, JLL is actively seeing the transition from “office curious” to “office serious” take hold across the industry. Lower interest rates are propelling much of that.

In addition, the number of bids on a given transaction was up 50% over the same period, with the second quarter alone experiencing $16 billion in office bid volume, which is the highest quarterly total since the second quarter of 2022 when the 10-year treasury yield was below 3%. Bid volume can measure growth and health of a sector from a capital markets perspective. 

“What typically happens is, after a downturn, the high-net-worth private capital comes back in because of opportunistic returns, and they start buying. The REITs follow, and then the institutional capital flows, like pension funds, separate accounts, offshore capital, follow the REITs. That’s exactly what’s playing out right now,” said Mike McDonald, senior managing director and office group leader at JLL. 

Larger deal demand, that of $100 million or more, is increasing, up roughly 130% in the first half of this year compared with the same period in 2024. This is due to increasing institutional investor appetite for higher quality office, as well as better debt availability, according to the report.

There is, of course, a flight to quality, with top-tier office buildings seeing the bulk of the demand. As those buildings fill up, second-tier buildings will start to see increased demand and could actually outpace the top tier buildings as it relates to rental rates and absorption over the next five years, according to McDonald.

The massive office downturn in the first years of the pandemic caused a pullback in planning for new buildings, so there is now very little new office space under construction. The market will see just 6 million square feet of office space delivered next year, which is 90% below the four year annual average following the great financial crisis. 

“Some people may refer to it as slowing down; it’s really hitting a brick wall,” said McDonald. “There’s going to be a dearth of new deliveries the next three years, as evidenced by the 6 million square feet next year, which is anemic based on 30-year historical averages.”

He also pointed to overall reduction of office inventory, as older office buildings are either torn down or converted to residential, hospitality, self storage, or just reimagined into something other than office.

The lowest quality, distressed segment is still seeing some bargain hunters, so there is something of a bar-bell effect. 

“We call them dark matter, and they do matter. It’s that 1-million-square-foot tower in downtown Detroit or Pittsburgh or Cleveland or Dallas that is 40% occupied,” said McDonald. “Capital looking for highly distressed, very opportunistic returns, very low basis, where an asset may have traded five years ago at $300 a foot, and they can buy it now for $50 a foot. At that lower investment, they can reduce rents and have more velocity because their basis is lower, they have more of a competitive advantage.”

Demand tailwinds for office overall continue, as company downsizing rates are stabilizing. Companies are also no longer shedding very much space when they relocate; in 2022, on average, companies were getting rid of almost 20% of their space when they made a move. That is now down to 3%, according to JLL, a clear sign of stabilization.

This year REIT acquisitions have been strong. The stocks of office REITs like BXP, Vornado and SL Green are higher in the last six months, although the largest, Alexandria Real Estate Equities, is still struggling.

Lower interest rates over the next several quarters will certainly help in the cost of debt for dealmaking, but the reason rates are coming down is because of weakness in the economy. That creates a new pressure on the office market when it comes to demand from employers. 

“We’re very mindful of the impact, what that’s going to have on the actual tenant and the companies that actually occupy these buildings,” said McDonald. “You have to think about the macroeconomy, geopolitical risks, all the things that go into setting our overall capital market environment, and price of debt is just one component of it.”

McDonald said next year may be more about institutional capital taking the lead. These so-called green shoots in the office market will likely propel both leasing metrics and valuations higher over the next several years. 

U.S. startup airline Breeze Airways is planning to fly internationally for the first time early next year, aiming to win over sun-seeking travelers as the carrier enters its fifth year of flying.

The airline’s host of seasonal service kicks off on Jan. 10 with a Saturday-only route between Norfolk, Virginia, and Cancun, Mexico, followed by roundtrips between Charleston, South Carolina, and Cancun on Jan. 17, also only on Saturdays.

Other routes include Saturday service to Cancun starting from New Orleans on Feb. 7 and from Providence, Rhode Island, a week later. In March, Breeze is also planning to start Thursday and Saturday service between Raleigh-Durham International Airport in North Carolina and Montego Bay, Jamaica, and Wednesday and Saturday service to Punta Cana in the Dominican Republic. Flights from Tampa, Florida, to Montego Bay start on Feb. 11.

Breeze was launched by JetBlue‘s founder, David Neeleman, and debuted during the pandemic, in May 2021.

The carrier been working for years with the Federal Aviation Administration to win certification to fly internationally, Lukas Johnson, Breeze’s chief commercial officer, said in an interview.

It’s the first sizeable U.S. passenger airline to win that certification since Virgin America, which was acquired by Alaska Airlines in 2016, Johnson said.

He said Breeze is continuing its business model of flying its Airbus A220-300s between cities that have little to no competition from rivals and added that the new routes are “an exciting starting point for us.”

“We feel really confident that it’s going to be a guest response,” he said.

Fares for the new routes start as low as $99 one way, but Johnson said premium-class demand for its pricier, roomier seats has been strong and that there is a double-digit percentage of guests who book to a more expensive seat the second time they fly Breeze.

Starbucks announced a $1 billion restructuring plan Thursday that involves closing some of its North American coffeehouses and laying off more workers as it moves ahead with its “Back to Starbucks” transformation under CEO Brian Niccol.

The number of company-operated stores in North America will decline by about 1% in fiscal year 2025, accounting for both openings and closures, the company said in an SEC filing. Starbucks operated more than 11,400 locations in North America as of June 29, suggesting that more than 100 cafes will shutter their doors as part of the restructuring plan.

Approximately 900 non-retail employees will be laid off on Friday, Starbucks said.

Starbucks estimates that 90% of the expected $1 billion restructuring cost will be attributable to the North America business. In total, the company expects to incur about $150 million in employee separation costs, plus about $850 million in restructuring charges related to the store closures, according to the filing. A significant portion of expenses will be incurred in fiscal year 2025, it said.

Starbucks said in the filing it is prioritizing investment “closer to the coffeehouse and the customer” as it looks to reverse a sales slump in its biggest market. The company’s same-store sales have fallen for six straight quarters, hurt by increased competition and price-conscious consumers.

This is the second round of layoffs in Niccol’s tenure, after 1,100 corporate workers were let go earlier this year. Starbucks ended 2024 with about 16,000 employees who work outside of store locations.

“These steps are to reinforce what we see is working and prioritize our resources against them,” Niccol wrote in a letter to employees Thursday. “I believe these steps are necessary to build a better, stronger, and more resilient Starbucks that deepens its impact on the world and creates more opportunities for our partners, suppliers, and the communities we serve.”

In July, the company announced its biggest investment ever into labor and operating standards, “Green Apron Service,” which involves a more than $500 million investment in labor hours across company-owned cafes in the next year.

In an interview earlier this month, Niccol told CNBC, “I really hope we’re moving towards being the world’s greatest customer service company, [and] the world’s greatest customer centric company.”

In the message to employees Thursday, Niccol said the company had reviewed and identified stores where the company would be “unable to to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.”

Starbucks executives had previously said that the company would be slowing new openings in favor of remodeling existing locations this year. The renovated cafes are meant to encourage customers to linger, taking the coffee chain back to its roots as a “third place” for consumers, outside of home and the office.

Following Thursday’s announcement, share of Starbucks were roughly flat in premarket trading. The stock has fallen more than 7% this year.

In addition to focusing on the customer experience, Niccol has enacted additional changes to operations including a return to four days in office, beginning next month.

He’s also brought on a new executive team including CFO Cathy Smith, Global Chief Brand Officer Tressie Lieberman and Chief Operating Officer Mike Grams. Grams and Lieberman worked with Niccol in his previous roles at Chipotle and Yum Brands.

Read Niccol’s full memo to Starbucks staff: