Capital Expenditure: A Growing Drag On Office Returns

MSCI data shows that capital expenditure is now more of a drag on global office returns than at any time since 2001. Across the MSCI Global Property Index, the gap between office asset value growth and capital value growth – the portion of value change attributable to capital expenditure rather than market revaluation – has widened markedly. The trend is most acute in the U.S. office market, where capital expenditure requirements took more than 3% off total returns in 2025.

Offices increasingly demand capital just to retain tenants and maintain valuations: energy-efficiency retrofits, M&E plant replacement and fit-out upgrades that fulfil changing grade A specifications. Such requirements have increased just as yield expansion has eaten into capital value, so that capex consumes a rising share of a shrinking return.

In some cases, owners can inject capital into assets to bring them up to market standard and benefit from the divergence in rental performance between the best-performing assets and the rest of the market. But the data shows for most owners it is a case of running just to stand still.