NEW YORK CITY, New York: New York's office market is showing signs of a comeback as major investors, including Blackstone, scout for deals amid a growing return-to-office trend.

As companies encourage employees to return to in-person work, demand for high-quality office space is rising, fueling optimism in the commercial real estate sector.

After years of pandemic-driven vacancy, investors and landlords report increased interest in top-tier office buildings. Amazon is searching for additional space, BXP is negotiating with tenants for a new high-rise, and Blackstone sees long-term value in office properties in both New York and San Francisco.

"In New York, you have financial services firms that are growing rapidly, but you don't have any new buildings," said Blackstone President Jonathan Gray. "In San Francisco, the values fell very hard, in some cases 75 percent, and AI and technology innovation really (are) housed in San Francisco."

Blackstone, which previously reduced its office holdings, now sees renewed potential. While office exposure once made up over 60 percent of its real estate portfolio in 2007, it has dropped to less than two percent today. However, the firm is exploring a major stake in 1345 Avenue of the Americas in Manhattan, indicating confidence in the market's rebound.

Economic growth and lower interest rates are also contributing to renewed interest in commercial real estate. "The world is moving back to work and back to in-person work, no question about it," said BXP Chairman and CEO Owen D. Thomas. "Real estate is a financial asset driven by interest rates, so that is helpful."

BXP is in discussions with multiple tenants to anchor a planned 46-story tower in Midtown Manhattan, near JPMorgan Chase's upcoming global headquarters. The tower will accommodate 14,000 employees by the end of the year.

As companies transition back to full-time office attendance, some firms may face space shortages after years of downsizing. JLL Research noted that employers who cut office space over the last five years may need to re-expand to meet new workplace policies.

Amazon is actively looking for additional office space in New York, a source confirmed, though the company declined to comment.

Investor confidence is reflected in cap rate trends, a key metric for real estate profitability. After peaking at 6.99 percent in early 2024, cap rates fell to 5.77 percent by year-end, signaling improved returns. Commercial property sales in the U.S. also rose 9 percent in 2024 after plummeting by 50 percent in 2023, according to CBRE.

In Manhattan, office occupancy has climbed significantly. Avison Young data showed utilization at 79.9 percent in January 2025, compared to 66.9 percent in other U.S. cities.

Wealthy investors are also re-entering the market. "Our CRE loan portfolio in the private bank is growing, which tells you that there's a lot of demand and confidence in opportunities within the sector," said Nishi Somaiya, global head of private banking at Goldman Sachs.

Even in Europe, demand for high-quality office space is rising, pushing London rents to record highs. "People got very excited post-COVID that this was the end of the office—it was never the end of the office," said Hugh White, a senior director at BNP Paribas Real Estate.