The Return to the Office: Are Cities Making a Comeback?
The pandemic and the work from home mandate, led many to pursue spacious homes, quieter surroundings, and the satisfaction of a well-manicured lawn. This left many urban centers in flux. However, recent trends suggest that the pendulum may be swinging back. Multiple reports highlight that real estate firms like Savills, Blackstone and even Floyd Mayweather are increasingly optimistic about a resurgence in urban property demand.
The driving force? Many companies are actively encouraging employees to return to the office, while hybrid work models have solidified as the new standard. Office vacancies in places like San Francisco and New Year have appeared to bottom. In the fourth quarter of 2024, San Francisco's commercial real estate market recorded its first quarter of positive absorption and a slight decline in the overall vacancy rate since late 2019. The annual total leasing activity surpassed 7.7 million square feet (msf), the highest annual level recorded since the onset of the pandemic in 2020 and a 28.2% increase over the 2023 figure.
I’ve personally received a number of calls recently from friends, who after working from home now for 4 years, are now being called back to the office. While we’re not witnessing a full-scale migration back to city living, the renewed demand for downtown residences—such as lofts and condos—indicates a shift in preferences. In fact, Robert Rifkin the CEO of Compass recently expressed that he believes the most undervalued real estate market in the United States is the San Francisco condo market. See the short clip HERE.
Mortgage Rates Take a Dip: What’s Behind the Drop?
Mortgage rates have been trending downward in recent weeks, offering relief to prospective homebuyers. As of early March 2025, the average 30-year fixed mortgage rate has dropped to 6.64%, a decline from 6.74% in late February and a significant decrease from 7.15% a year earlier. This downward shift has fueled a light surge in mortgage demand, with applications rising 11% in the latest weekly data and jumping 20% earlier in the month as rates hit their lowest levels since last year.
The 10-year Treasury yield, a key benchmark for mortgage rates, has fallen from 4.79% at the start of the year to 4.29%, reflecting broader economic concerns. Global uncertainties, including trade tensions and potential recession fears, have driven investors to seek safety in bonds, pushing yields—and thus mortgage rates—lower. The next FOMC meeting is March 19th where it is likely they will keep the FED Funds rate the same.
