The New Geography of the American Office

For the better part of three years, the American office has been the subject of a prolonged public obituary. The narrative, fueled by the hollowed-out central business districts of San Francisco and New York, was seductively simple: remote work had rendered the skyscraper obsolete, and real estate investment trusts (REITs) were the primary casualties of this permanent shift to the kitchen table.

However, the FY2025 financial results from Keppel Pacific Oak US REIT (KORE) offer a startling rebuttal to the “death of the office” consensus. While the traditional “Gateway City” model is indeed grappling with structural rot, a “Great Sorting” is underway. The data reveals a decisive migration toward “Lifestyle Markets”—high-growth tech hubs like Bellevue, Austin, and Denver—where the office isn’t just a relic of the past, but a thriving center of a new, 18-hour professional ecosystem.

Far from a sector in terminal decline, KORE’s US$1.3 billion portfolio suggests that the office is currently being redesigned rather than discarded. With a portfolio occupancy of 87.2%, KORE is not only outperforming the broader US average but is actively de-risking its balance sheet against the headwinds of high interest rates. The following five takeaways explain the strategy behind this resilience and why the future of work looks remarkably different than the headlines suggest.

1. The Dividend Resumption: A Canary in the Coal Mine for Office Health

In the world of REITs, the dividend is the ultimate signal of management’s view on the future. The most striking headline from KORE’s FY2025 results is the early conclusion of its Recapitalisation Plan. Originally, distributions were suspended from the second half of 2023 through the end of 2025 to preserve capital. Yet, in a move that signals intense confidence in their recovery trajectory, KORE announced an early resumption of distributions at 0.25 US Cents per unit for 2H 2025.

This isn’t merely a symbolic payout; it is the result of aggressive, proactive capital management. By securing a US115.0 million term loan facility and a subsequent US37.5 million facility, KORE successfully addressed all 2025 and 2026 loan maturities. This refinancing pushes the trust’s weighted average term to maturity to 2.1 years (pro-forma), effectively insulating the portfolio from immediate credit shocks.

“KORE… intends to progressively increase payout in line with long-term portfolio performance.”

2. The “Lifestyle Market” Advantage: Bridging the Urban-Suburban Gap

The central thesis of KORE’s resilience is its pivot away from the “Gateway” trap. While Gateway Cities languished with an average occupancy of 83.1% in 2025, KORE’s focus on Tech Hubs—specifically Bellevue/Redmond, Austin, and Denver—has paid off. These markets now contribute approximately 66% of the trust’s Net Property Income (NPI).

These are not traditional suburbs; they are “Lifestyle Markets” that offer the vibrancy of an urban core without the exorbitant costs or the friction of a legacy CBD commute. They win by offering a self-contained “live-work-play” ecosystem that appeals to both mobile talent and cost-conscious corporations.

Why Lifestyle Markets are Outperforming:

• 18-Hour Vibrancy: High-aesthetic environments with dining, social spaces, and nightlife that foster the “coworker connections” remote work lacks.
• Lower Living Costs: Favorable income tax environments in states like Texas and Tennessee attract a skilled workforce that is increasingly prioritizing quality of life.
• Talent Proximity: Locations like Bellevue and Austin provide direct pipelines to top-tier universities, creating a natural magnet for innovation-led firms.

3. A Cycle-Tested Portfolio: Occupancy That Defies the Slump

Critics might call KORE’s 87.2% occupancy a lucky post-pandemic bounce, but the longitudinal data suggests otherwise. KORE has consistently maintained a lead over both the US Average (85.9%) and Gateway Cities (83.1%) since 2019. This performance proves the model is cycle-tested, having outperformed benchmarks through the entirety of the COVID-19 disruption.

The trust has built a strategic moat by curating a tenant base in “Growth and Defensive” sectors. Approximately 51% of KORE’s net lettable area is occupied by TAMI (Technology, Advertising, Media, Information) and medical/healthcare firms. This isn’t just a high-growth play; with over 390 tenants across diversified industries, KORE has successfully minimized concentration risk, ensuring that no single industry downturn can sink the ship.

4. The “Pickleball & Pastries” Strategy: The Amenity-Rich Arms Race

To convince a hybrid workforce to leave the house, the office must become a destination. KORE’s Asset Enhancement Initiatives (AEI) in FY2025 treated the office more like a hospitality product than a real estate play. Highlights include a new Pickleball court and the “Greenhouse” floor at The Plaza Buildings, and the “Dote To-Go” coffee and pastry bar at Westpark.

A critical pillar of this strategy is the “Spec Suite”—smartly programmed, move-in-ready spaces typically under 7,500 square feet. For landlords, these reduce lease-up times and long-term capital expenditure. The strategy’s success is best seen at the 1150 Iron Point property in Sacramento, where KORE successfully leased all four speculative suites built.

The urgency behind these upgrades is validated by broader market shifts. According to JLL Research, the era of “gentle encouragement” is over.

“97% of Fortune 100 employees [are] now subject to hybrid or full-time office mandates, averaging 4.0 days per week in office.”

As firms like Amazon and JPMorgan enforce these mandates through badge-swipe data, the demand for high-quality, highly amenitized space is reaching new post-pandemic highs.

5. The Supply Squeeze: An “Owner’s Market” in Disguise

While the media focuses on dwindling demand, the most potent growth driver for KORE is actually the supply side. US office space under construction has plummeted to more than 20% below the 2011 historic low—the lowest point in over 30 years.

This creates a fascinating counter-intuitive benefit: while the total demand for office space has shifted, the available supply of the specific type of space tenants actually want—modern, amenitized, and well-located—has shrunk even faster. This scarcity creates a natural floor for rents. With net-negative inventory expected to persist through 2026 as older Gateway buildings are converted to residential use or decommissioned, existing premium assets like KORE’s are becoming increasingly scarce.

Conclusion: The Office of 2026 and Beyond

As we move into 2026, the US office market is signaling the start of a new expansionary cycle. Transaction activity in 2025 rose 35% year-on-year, a clear indicator of improving lender confidence. KORE’s ability to refinance US$152.5 million in debt and resume its dividend early is not an anomaly; it is a reflection of capital markets returning to stabilized, well-located assets.

The “work-from-home” era was a disruption that ultimately served as a catalyst for evolution. It forced the office to shed its sterile, utilitarian past and become a “vibrant lifestyle” version of itself. Looking at the 6.4 million square feet of positive net absorption in 2025, the question is no longer whether people will return to the office, but rather which offices are sophisticated enough to earn their attendance. For the Lifestyle Markets of the American West and South, the data suggests the answer is a resounding yes.

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