TL;DR
- Trophy Class A trades have resumed at 2018-equivalent cap rates in gateway markets.
- Mid-tier Class A remains capital-starved with bid-ask spreads still wide.
- Value-add and opportunistic capital is targeting reposition and conversion plays.
- Debt markets have reopened for trophy assets at 50–55% LTV.
- Cross-border capital has rotated toward Tokyo, Singapore, and Sydney trophy.
Trophy is bid
Trophy Class A trades have resumed in gateway markets at cap rates roughly comparable to 2018: 4.5–5.5% in Manhattan and London City; 4.0–5.0% in London West End and Tokyo Marunouchi; 4.5–5.0% in Singapore CBD. Marquee 2025 trades validated the bid stack and reset the comparable set for 2026 underwriting.
Mid-tier remains capital-starved
Mid-tier Class A in tertiary submarkets remains capital-starved. Bid-ask spreads are still wide, debt is selectively available, and the institutional buyer pool has shrunk. Many transactions in this segment now involve seller financing, joint ventures with operators, or off-market trades to opportunistic capital.
Value-add and opportunistic
Value-add and opportunistic capital is targeting reposition (Class B+ to Class A) and conversion (office to multifamily / hospitality / lab). Yield on cost targets are now 6.5–8.0% for repositions and 7.0–9.0% for conversions, with significant city-by-city variation.
Debt markets
Debt markets have reopened for trophy assets at 50–55% LTV at coupons around the 5-year swap + 200–250 bps. Mid-tier debt is more selective; CMBS and life-co lenders dominate the bank-cautious environment.
Cross-border rotation
Cross-border capital has rotated meaningfully toward Tokyo (yen weakness, low cap rates, deep institutional market), Singapore (regional flagship status, GIC/Mapletree comparables), and Sydney (yield premium to Tokyo and Singapore). North American cross-border has slowed sharply.
Frequently asked questions
- Are office REITs still investible?
- Selectively — REITs with trophy-heavy portfolios in supply-constrained gateway markets are recovering. REITs concentrated in mid-tier suburban office remain structurally challenged.
- What is the cap rate for a London City trophy?
- Recent comparables (2025) cleared at 4.5–5.0% net initial yield for stabilised trophy assets in the City. West End tightens to 4.0–4.5% for the very best stock.