As the second quarter of 2025 unfolds, the U.S. office sector continues to navigate a measured recovery. Leasing volumes are gaining ground, approaching pre-pandemic benchmarks, though deal sizes remain compressed and long-term commitments are tempered by economic uncertainty. New York leads the return-to-office trend, with attendance nearing 85% of pre-pandemic levels. Despite these gains, the national vacancy rate has edged up to 14.2%, reflecting the dual pressures of cautious tenant behavior and a modest influx of new supply. While demand is strengthening in high-quality assets, older and less competitive buildings continue to face headwinds.
Smaller occupiers are upgrading to higher-quality spaces, while larger tenants remain in place, constrained by limited premium availability and slower headcount growth. The construction pipeline is shrinking, with just 62.6 million square feet under construction, the lowest since 2012, and less than 16 million square feet breaking ground over the past year. Future deliveries are expected to remain historically low through 2029, with only a third of current projects representing traditional office space.
National office real estate trends
- Vacancy in Class A space stands at 21.2%, while Class B vacancy is 12.7%.
- Leasing volume in Q1 2025 approached pre-pandemic levels, but deal sizes remain about 15% smaller than the 2015–2019 average.
- Rent growth is expected to remain near 1% annually, as elevated concessions and sublease inventory continue to weigh on pricing.
- Only 45 million square feet were delivered in 2024, the lowest since 2012 and well below the 10-year average of 70 million square feet.
- The current 62.6 million square feet under construction is the lowest since early 2012, and less than 16 million square feet broke ground between Q2 2024 and Q1 2025.
- Just one-third of the current construction pipeline is traditional office space; the rest is medical, biotech, or owner-occupied.
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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.
