Image Source: UnsplashOffice buildings have been featured in the news quite a bit lately, though you’re excused if you didn’t notice any of it. Who cares about office properties these days? Especially with all the political drama going on.Besides, everyone knows the entire commercial real estate sector is a shadow of what it used to be. Once a steady moneymaker, especially in big cities like New York, Boston, and L.A., the shutdowns took a devastating toll on their worth.Despite warming to the idea that office space wasn’t going away altogether, analysts have remained skeptical about how much value they could actually claw back. Even in 2025, most people aren’t rushing to invest in such buildings – not by constructing them, buying them, or funding them.Understandably so when the work-from-home phenomenon is still “a thing.” Sure, Amazon (AMZN), United Parcel Service (UPS), and Goldman Sachs (GS) have all mandated full returns to the office. JPMorgan Chase (JPM), too, more recently, as well as federal employees. But is it enough?The answer to that question, I believe, is fairly complicated. Because the answer is: It depends. I recently wrote on Monday how:

… private equity juggernaut Blackstone (BX) President Jon Gray called a bottom to the global office market, “particularly in stronger markets and better-quality buildings.”

That’s a big deal considering how U.S. offices have fallen up to 70% from their pre-pandemic peak.

Gray says that Blackstone is in the process of buying a Midtown Manhattan office property. And they’re interested in exploring similar options this year.That news came just a month after Vanguard Group bought up over 187,000 shares of office real estate investment trust (“REIT”) Office Properties Income Trust (OPI), indicating that it’s been seeing similar signs.So, today, I want to explore if investors should be getting in on the action, too. Is this severely depressed sector ready to rise again?

A Closer Look at the Office-Sector Recovery
A colleague of mine at Hoya Capital, Alex Pettee, CFA, recently wrote about office buildings. And I think his insights are well worth sharing:

Beneath the universal pessimism on the office outlook, we’ve actually observed surprisingly positive green shoots for the office sector in recent quarters – helping to fuel a 25% rally for those REITs in 2025 – and the positive “green shoots” have continued entering this earnings season.

This showed in brokerage firm Jones Lang LaSalle’s (JLL) recent fourth-quarter office update that U.S. office owners signed 52.9 million square feet worth of leases. That’s up 4.9% from the third quarter, 17.6% year-over-year, and marks a post-pandemic high.LaSalle attributes much of this recovery to supply issues. There’s almost no new office building construction happening these days, and a number of existing properties have been repurposed into apartments instead.So, when big corporations begin to slowly but surely bring their employees back to the office full time, you’ve got obvious room for growth.Though, I do want to stress something: That doesn’t mean every office sector investment is going to benefit. These big corporations are looking for top-tier locations only, leaving many mid-quality properties out of luck.Then, there are the stories I teased at the top – one of which shows that politically blue states could be behind the curve regardless. Case in point: Delaware is losing businesses at a dramatic pace right now.The state used to be where billion-dollar companies went to incorporate thanks to their friendly tax laws. But then a judge there overruled Tesla (TSLA) shareholders’ vote to give Elon Musk a sizable compensation package. That’s why he packed up and moved both Tesla and SpaceX to Texas last year.Other companies are now considering or all-out making similar moves. This includes Meta Platforms (META), Dropbox (DBX), and Bill Ackman’s financial management company, Pershing Square.They want no part of judges in states meddling in their otherwise legal business operations. As such, I’m going to be hard-pressed to invest in office REITs that cater to those areas.

Caveat Emptor
We also can’t forget the Department of Government Efficiency. It’s looking to drastically downsize the U.S. government. And it seems to be succeeding so far.Some 40,000 federal employees have already accepted offers to leave with multi-month severance pay (although it appears a judge has temporarily blocked that initiative). And the U.S. Agency for International Development with its 10,000-plus workers looks like it’s going to be dismantled altogether.Given the likely reduction in government buildings, I’m avoiding REITs like Easterly Government Properties (DEA) that have exposure to facilities leased to the FBI, IRS, and others.To be fair, we could also see an increase in Department of Homeland Security personnel and, therefore, facilities. In which case, Easterly Government Properties might come out less scathed than expected.However, its payout ratio is in excess of 100%, which isn’t normally the healthiest of signs. It suggests that the REIT’s 9.7% dividend yield may very well be a sucker yield – meaning it’s too good to be true.I’m also skeptical of pure-play post office REIT, Postal Realty Trust (PSTL). Although not an office REIT exactly, it derives 100% of its revenue from a government-sponsored entity that lost around $9.5 billion in fiscal year 2024.Postal also has an unsafe dividend (now yielding 7%) with a payout ratio of around 91%. And while it did recently increase its dividend by 1%, that could be a head fake.It’s happened before. Last year, net-lease REIT W.P. Carey (WPC) announced a modest 0.19% dividend increase just days before it announced it was spinning its office properties off to form a new REIT. Then it slashed its dividend by nearly 20% the next quarter.These days, I prefer investing in office REITs with Sun Belt exposure like Highwoods Properties (HIW), a North Carolina-based landlord that owns properties in eight southern states. I also like mission-critical medical office buildings and REITs like Healthpeak Properties (DOC), which recently announced it was paying monthly dividends.Those are the office landlords that look like they’ll last. On all the others, I say, “buyer beware.”More By This Author:Make AI PayREITs Have (Almost) Everything Going For Them Under TrumpThis $457 Billion Industry Is Set To Grow A Lot In The Next Four Years