Office Real Estate Rebound in the Cards in 2026? 2 REITs to Watch

Core Insights - The U.S. office real estate market is experiencing a resurgence driven by rising demand for premium office spaces and declining supply, with expectations for a modest recovery by 2026 [1][9] - Factors such as increased workforce attendance, easing interest rates, and anticipated inflation decline are expected to benefit the office real estate sector [1][5] Industry Dynamics - The U.S. economy demonstrated resilience in 2025, with a real GDP growth of 3.8% in Q2, prompting the Federal Open Market Committee to raise its 2026 GDP growth forecast to 2.3% from 1.8% [3] - The adoption of artificial intelligence (AI) is enhancing productivity across corporate America, contributing to increased office leasing demand [4] - The push for return-to-office initiatives and a focus on high-quality work environments are driving demand for premium office assets [6] - Office supply is declining, with the construction pipeline at its lowest since the late 1990s, favoring landlords and leading to improved occupancy levels in premium properties [7] Company Analysis: Cousins Properties (CUZ) - Cousins Properties has a strong portfolio of Class A office assets in high-growth Sun Belt markets, benefiting from favorable migration trends and corporate relocations [8] - The company executed 128 leases totaling 1.4 million square feet in the first nine months of 2025, with a weighted average lease term of 7.9 years, indicating healthy leasing momentum [8] - The Zacks Consensus Estimate for 2025 FFO per share has been revised to $2.84, reflecting a 5.6% year-over-year growth, and CUZ holds a Zacks Rank 2 (Buy) [11] Company Analysis: Vornado Realty Trust (VNO) - Vornado Realty Trust focuses on high-quality assets in the New York City market, with significant properties like 555 California Street and theMART [12] - The company leased 2.8 million square feet in its New York office portfolio during the first nine months of 2025, with a weighted average lease term of 12.2 years, showcasing strong tenant commitment [13] - The Zacks Consensus Estimate for 2025 FFO per share has been revised to $2.34, indicating a 3.5% year-over-year growth, and VNO holds a Zacks Rank 3 (Hold) [15]