Lessors of Nonresidential Buildings NAICS 531120

Apr 20, 2026 - Prices Slashed for Lower-Tier Office Buildings

• The US office market is undergoing a sharp downturn, with some buildings selling at discounts exceeding 90% as owners and lenders accept losses after years of holding out for a post-pandemic recovery, according to The Wall Street Journal. For lessors of nonresidential buildings, the downturn is driving significant financial pressure, including rising vacancies, lower rents, and costly tenant incentives needed to fill space. Many landlords are being forced to sell at steep losses or reposition assets, while lenders push for repayments or foreclosures. Distressed sales are also accelerating conversions to residential and other uses, reducing long-term office inventory. As investors acquire properties at reduced prices, lessors must adapt by reevaluating pricing, exploring redevelopment, and managing higher operating costs in an uncertain demand environment.
• Commercial real estate M&A activity surged in the first quarter, with more than $28 billion in announced deals as institutional and private capital targeted portfolios and operating platforms amid volatile equity markets elevated interest rates, according to Bisnow. The wave of acquisitions is intensifying consolidation and competition among nonresidential landlords, as buyers seek both assets and in-place management capabilities to scale operations quickly. This trend increases pressure on smaller landlords to compete with larger, vertically integrated firms that benefit from capital access and operational efficiencies. REIT privatizations and mergers are accelerating due to discounted valuations and shareholder pressure. As capital continues to flow into large portfolios, lessors must adapt by improving performance, enhancing tenant retention, and positioning assets to remain competitive in a rapidly evolving ownership landscape.

• Artificial intelligence is expected to reshape office demand, with impacts varying by asset quality as high-end buildings remain resilient while lower-tier properties face higher vacancy risk, according to Newmark and reporting by Facilities Dive. Newmark projects office-using employment will grow just 0.3% from 2026 to 2030, with vacancy reaching about 21.5% under its base case scenario. This shift increases pressure on landlords of class B and C assets, where automation-driven job changes may reduce tenant demand and raise vacancies. Property owners must adapt by upgrading space, improving amenities, and offering flexible lease terms to attract tenants. Demand is expected to concentrate in premium locations, while hybrid work and AI-driven productivity reshape space needs.
• The Wall Street Journal reports that service-oriented tenants such as salons, spas, and fitness studios are overtaking traditional retailers in leasing activity, accounting for just over 50% of retail space in 2025, up from 40% 15 years ago, according to CoStar. The shift reflects rising consumer spending on wellness and experiences, alongside ecommerce growth, which now represents 16.4% of retail sales and has reduced demand for goods-based store space. For nonresidential building owners, the trend is reshaping property strategies, as landlords reconfigure large retail spaces into smaller units for multiple service tenants, generating higher rents and increasing foot traffic. Fitness operators alone made up nearly 30% of service leases last year. Strong demand from these tenants has helped keep retail vacancy low at about 4.4%, while backfilling spaces left by struggling retailers and supporting more stable occupancy and revenue streams.