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I recently installed Microsoft Office 365, where the default installation type was 32 bit and the 64 bit option was hidden under a menu:

As well as this, the installer for Microsoft Visio defaults to a 32 bit installation of the software:

Microsoft themselves say that the 64 bit version is better for use cases requiring large amounts of memory (e.g. working with large numbers and files).

With the vast majority of modern computers (if not, all modern computers) being 64 bit, why does Microsoft still opt to install a 32 bit version of Microsoft Office by default?

Surely defaulting to a 32 bit installation could confuse users and would degrade performance in the above use cases?

As Ramhound has said - and what is backed by Microsoft (Source: https://support.office.com/en-us/article/choose-between-the-64-bit-or-32-bit-version-of-office-2dee7807-8f95-4d0c-b5fe-6c6f49b8d261) - it all boils down to backward compatibility.

Reasons to choose the 32-bit version

Note: If you have 32-bit Windows, you can only install 32-bit Office.
If you have 64-bit Windows, you can install 32-bit Office or 64-bit
Office.

IT Professionals and developers in particular, should also review the
following situations where the 32-bit version of Office is still the
best choice for you or your organization.

• You have 32-bit COM Add-ins with no 64-bit alternative. You can continue to run 32-bit COM add-ins in 32-bit Office on 64-bit Windows.
  You can also try contacting the COM Add-in vendor and requesting a
  64-bit version.




• You use 32-bit controls with no 64-bit alternative. You can continue to run 32-bit controls in 32-bit Office like Microsoft
  Windows Common Controls (Mscomctl.ocx, comctl.ocx), or any existing
  3rd-party 32-bit controls.




• Your VBA code uses Declare statements Most VBA code doesn’t need to change when using in 64-bit or 32-bit, unless you use Declare
  statements to call Windows API using 32-bit data types like long, for
  pointers and handles. In most cases, adding PtrSafe to the Declare and
  replacing long with LongPtr will make the Declare statement compatible
  with both 32- and 64-bit. However this might not be possible in rare
  cases where there is no 64-bit API to Declare. For more information
  about what VBA changes are needed to make it run on 64-bit Office, see
  64-Bit Visual Basic for Applications Overview.




• You have 32-bit MAPI applications for Outlook. With a growing number of 64-bit Outlook customers, rebuilding 32-bit MAPI
  applications, add-ins, or macros for 64-bit Outlook is the recommended
  option, but if needed you can continue to run them with 32-bit Outlook
  only, as well. To learn about preparing Outlook applications for both
  32-bit and 64-bit platforms, see Building MAPI Applications on 32-Bit
  and 64-Bit Platforms and the Outlook MAPI Reference.




• You’re activating a 32-bit OLE server or object. You can continue to run your 32-bit OLE Server application with a 32-bit version of
  Office installed.




• You're using SharePoint Server 2010 and you need the Edit in Datasheet view. You can continue to use the Edit in Datasheet view
  functionality in SharePoint Server 2010 with 32-bit Office.




• You need 32-bit Microsoft Access .mde, .ade, and .accde database files. While you can recompile 32-bit .mde, .ade, and .accde files to
  make them 64-bit compatible, you can continue to run 32-bit .mde,
  .ade, and .accde files in 32-bit Access.




• You require Legacy Equation Editor or WLL (Word Add-in libraries) files in Word. You can continue to use Legacy Word Equation Editor and
  run WLL files in 32-bit Word.




• You have an old embedded media file in your PowerPoint presentation with no available 64-bit codec.

32-bit focused answer above is excellent. Here's an alternate answer focused on when 64-bit is needed or is preferable.
TIP: I was thinking about installing Visio 2016 64-bit until I realized I have Office 2016 32-bit already installed by my employer... which hits the _Important before you Install_ note at the end of the excerpt below.

Excerpt from Understanding 32 bit (x86) versus 64 bit MS Office Installations ('last modified on 16 October 2017')

The 64-bit version of Office has some limitations, but is the right
choice when:

1. You work with extremely large data sets, like enterprise-scale Excel
   workbooks with complex calculations, many PivotTables, connections to external databases, PowerPivot, PowerMap, or PowerView. The 64-bit version of Office may perform better for you.


2. You work with extremely large pictures, videos, or animations in PowerPoint. The 64-bit version of Office may be better suited to handle these complex slide decks.


3. You work with extremely large Word documents. The 64-bit version of Office may be better suited to handle Word documents with large tables, graphics, or other objects.


4. You’re working with files over 2GB in Project, especially if the project has many subprojects.


5. You want to keep the 64-bit version of Office that you’re already using. The 32-bit and 64-bit versions of Office programs aren’t compatible, so you can’t install both on the same computer.


6. You’re developing in-house Office solutions, like add-ins or document-level customizations. Your organization requires Hardware Data Execution Prevention (DEP) be enforced for Office applications. DEP is a set of hardware and software technologies that some organizations use to enhance security.

If none of these situations apply to you, the 32-bit
version of Office is probably the right choice.

Note: The 32-bit version of Office works well with both the 32-bit and
the 64-bit versions of Windows. If you are installing the 64-bit
version of Office, you need the 64-bit version of Windows. If you’re
not installing on Windows, you don’t need to worry about 32-bit or
64-bit options. Which version of Office do I have?

Important before you Install

If you have a version of 32-bit or 64-bit Office in your computer and
you want to install Office 365, Office 2016, Office 2013, or an Office
stand-alone application like Visio, you have to install the
corresponding 32-bit or 64-bit version of the other program. For
example, if your computer has a 32-bit version of Office 2010 and you
want to install Office 2013, you have to install the 32-bit version.
You can't mix 32-bit and 64-bit versions of Office. For details, see
“Office (64-bit) couldn’t be installed” error when you install Office
2013 or Office 365.

The suggestion about how to choose between the 64-bit or 32-bit version of Office, the article you shared above has listed many reasons.

About why the default Office downloading is 32-bit version instead of 64-bit, I think it may be a compatibility consideration:

The 32-bit version of Office can be installed on both 32-bit and 64-bit Windows OS. And the 64-bit version of Office can only be supported on 64-bit of Windows.

When the end-users download Office from Office 365 Portal, they may be not consider more about their Windows OS bit. Therefore, the 32-bit version of Office can be listed as the default Office version for better compatibility.