The return-to-office initiative has not revitalized America’s office market, as reported by Business Insider. Office buildings experienced an 11% drop in value in 2024, with average prices falling to $174 per square foot. Since 2019, the average sale price of office buildings has plummeted by 37%. Analysts at Capital Economics predict that office values could decline another 10% through 2029. While some areas of the market are performing better, the national office vacancy rate reached nearly 20% in January. Experts suggest that the struggles of the office sector will continue, with a weak recovery expected in 2025 and ongoing debates about return-to-office policies likely extending until 2027.
And speaking of physical space, Microsoft has announced that its plan to invest eighty billion dollars in data centers for the fiscal year ending in June remains on track. This statement follows a report from investment firm TD Cowen, which claimed the company was canceling leases with data center operators, implying a decrease in demand for generative artificial intelligence. Microsoft did not confirm the details of the report but stated that customer demand still exceeds supply. Recently, the company paused construction on a multi-billion dollar data center in Wisconsin to assess technology changes.
Why do we care?
The IT market remains strong, but the collapse of commercial real estate and shifting AI infrastructure strategies suggest that MSPs should focus on hybrid work solutions, cloud cost management, and AI integration—not traditional office IT.
The other areas to consider – the impact on customers. Declining office values could hurt commercial real estate-dependent IT providers who rely on traditional office infrastructure services, or customers with dependencies on the real-estate market. Businesses delaying office decisions until 2027 could result in prolonged uncertainty around IT purchasing cycles tied to real estate investments. If your customers are linked to real estate, you should be concerned.
