Multifamily Risks Mount as Office Properties Offer Window for Value
Globest.com
September 2, 2025
By Erik Sherman
After years of soaring demand and skyrocketing prices, multifamily real estate finds itself at a
crossroads—a stark reversal from its pandemic heyday, when investors flocked to the asset class
seemingly immune to risk. Office properties, by contrast, endured public scorn as remote work
drained value from traditional workspaces and left owners battling steep losses. According to Marcel
Arsenault, CEO of Real Capital Solutions, the two sectors have now traded places in the eyes of
cautious investors, with office emerging as the unexpected opportunity and multifamily struggling to
adapt.
Speaking with GlobeSt.com, Arsenault said that distress runs deep in the office market. “We believe
there are about $321 billion in distressed office debt over the next few years, with roughly half likely
to be written off,” he noted. On average, office values are down by 21.5% from their peak, and
Arsenault predicts that they will go down another 15% or 16%, bringing the total decline passed 36%.
Cap rates, which once hovered around 5% or 6%, now edge closer to 9%—and in especially turbulent
deals, they go even higher.
Research from Yardi Matrix adds further context, reporting that nearly half of all office properties
changing hands today do so at a discount. Arsenault says his team is capitalizing on those conditions.
“The deals we’re buying are at a 12 cap on average,” he explained, targeting Class A or A-minus
buildings that are typically about 70% leased. “We’re buying distressed deals from owners who can’t
pay the tenant improvement or leasing commission. The cap rates are up, but the lenders don’t like
office.” He even describes purchasing assets from one of the country’s largest funds for “less than half
of what they paid.” As many investment funds reach the end of their planned cycles and face pressure
to return money to investors, taking a loss sometimes becomes unavoidable.
Real Capital has issued letters of intent and contracts on about $1 billion worth of office properties,
although fierce competition means only a fraction of those deals will stick. “We have an appetite for
another billion,” Arsenault told GlobeSt.com.
However, multifamily investments carry their own risks at present. Arsenault warns that the sector’s
wave of new construction has led to an oversupply of apartments—a problem amplified by abundant
financing and lender enthusiasm.
“We’ve been worried the last couple of years about the big bulk of new construction, the oversupply
of apartments,” he said. “There’s a lot of money and lenders propping up apartments. We’ve been
warning people off apartments in the last three years.”
Arsenault expects the market to face another 15% to 20% correction, suggesting that real buying
opportunities will emerge next year and beyond.
