Office · United States

What owners are underwriting in US office

Owners are underwriting a 7.2% going-in cap to a 7.0% exit over a 5-year hold.

Drawn from 203 underwriting models 3E builds and maintains for 51 owners and operators buying office across the US.

Updated 2026-10-14

The assumption stack

Exit caps, hold periods, leverage and coverage do not appear in any sale-comparable database. They exist only inside the model a buyer built. These are the medians across 3E's client underwriting.

From 3E client underwriting models203 properties

Exit cap rateThe cap rate the model assumes at sale, which sets the reversion value.

7.0%

6.5%7.5%

middle 50% · 194 models

Exit vs going-in spreadHow much cap-rate softening the underwriting builds in. Computed per deal, then taken as a median.

+4 bps

−82 bps+94 bps

middle 50% · 136 models

Hold periodYears from acquisition to the modelled sale.

5.0 yrs

5.0y6.5y

middle 50% · 191 models

Year-one DSCRNet operating income divided by debt service in the first full year.

1.68x

1.29x2.11x

middle 50% · 150 models

Loan-to-valueLoan amount as a share of purchase price at close.

65%

60%65%

middle 50% · 168 models

Interest rateThe rate carried in the model at close.

6.06%

5.50%6.78%

middle 50% · 188 models

Operating expense ratioTotal operating expenses as a share of effective gross income.

42%

33%52%

middle 50% · 186 models

Levered IRRThe levered internal rate of return the model projects over the hold.

16.4%

13.1%23.1%

middle 50% · 184 models

A 5-year hold is the convention here. 38% of the 191 models carrying a hold period use exactly that figure. Where a business plan genuinely needs longer, the underwriting is doing something the rest of the market is not — worth being deliberate about.

Pricing

Two independent reads: what 3E's clients are paying, and what the wider market has transacted at. Where they disagree, the gap is usually the story.

Priced into 3E client underwriting203 properties

Going-in cap rateYear-one net operating income divided by purchase price.

7.2%

5.8%8.4%

middle 50% · 146 models

Price per square footPurchase price divided by net rentable area.

$211/SF

$151$319

middle 50% · 183 models

Market sale comparables2,173 sales · 2022–2026

Going-in cap rateYear-one net operating income divided by purchase price.

7.6%

6.3%9.0%

middle 50% · 262 sales

Price per square footPurchase price divided by net rentable area.

$240/SF

$148$370

middle 50% · 2168 sales

Market context

Public reference data for the market, and the hazard profile of the properties 3E is actually underwriting in it.

Natural hazard

In a FEMA flood zone: 5%
Median national risk percentile: 73
Tornado risk, high or above: 43%
Hail risk, high or above: 34%
Heat Wave risk, high or above: 25%

Across the 186 properties in this cut that carry a FEMA profile. Flood zone = Special Flood Hazard Area (1% annual chance). Risk percentile from the FEMA National Risk Index.

Rate environment

10-year Treasury: 5.21%
5-year Treasury: 5.00%
SOFR, overnight: 3.89%

Federal Reserve Bank of St. Louis (FRED), as of 2026-10-13. The backdrop the rates above were underwritten against.

Method

Where the underwriting figures come from

3E builds and maintains acquisition and asset-management models for owners and operators. The figures above are medians across those models — 203 distinct properties in this cut. They describe what buyers are assuming, not what any property is worth.

Market context

Demographics are US Census Bureau ACS 5-year estimates for the metropolitan statistical area; benchmark rates are published by the Federal Reserve Bank of St. Louis. The hazard profile is not a statistic about the metro — it is computed across the 3E-modelled properties in this cut, using FEMA flood maps and the National Risk Index, and so describes what buyers here are actually choosing to underwrite.

What the ranges mean

The large figure is the median. The two smaller figures are the 25th and 75th percentiles — the middle half of the sample — and the tick marks where the median falls between them. A median hard against one end indicates a skewed sample, which is worth knowing before leaning on the number.

Run this on your deal

Send one OM or T-12 and 3E will underwrite it properly — model, sensitivities, debt sizing and a risk score — benchmarked against the figures above and delivered in the portal within three business days. No charge, and no meeting needed.

Email ebergin@3emanagement.org