The office market is navigating a complex recovery, with stabilization tempered by persistent volatility.
Negative absorption of 23 million square feet pushed cumulative losses since the pandemic to 210 million square feet, and despite a later stabilization in demand, an influx of new supply kept vacancy rates high.
Despite return-to-work mandates, vacancy rates are expected to exceed 13.9% as users are looking for less square footage but more building amenities. Buildings with lots to offer in vibrant areas are in demand and contributing to the overall increase in rental rates. A new class of A+ office space in key markets are in strong demand. However, many office building values have declined by 40% to 45% in recent years, as it continues to be a tale of two markets.
National office real estate trends
- Vacancy in class A space is nearly 21%.
- Lease sizes are 15% to 20% smaller than the 2015–2019 average.
- Less than 45 million square feet in new deliveries were completed in 2024, the least since 2014 and far below the 10-year average of 70 million square feet.
- The stock of office space rose by nearly 25 million square feet, with a similar amount expected in 2025.
- This quarter, 71.1 million square feet is under construction, the least since mid-2012.
- Only about 14 million square feet broke ground in 2024, less than half of the previous record low in 2010.
- Economic activity and job growth are expected to slow into 2025 as the full impact of higher interest rates flow through the economy. However, growth is expected to reaccelerate in the next two years as the incoming administration implements an expansionary fiscal policy.
If you’d like to learn more about the nation’s office real estate outlook, download the full report below. This report will give you full insight into the topics mentioned above along with a variety of other statistics to help you stay ahead of market trends.
Information contained in this report is provided, in part, from third-party sources, including the U.S. Bureau of Labor Statistics, the Bureau of Economic Analysis, Engineering News-Record, and CoStar Group. Even though obtained from sources deemed reliable, no warranty or representation, expressed or implied, is made as to the accuracy of the information herein.
