A record low in net deliveries and a sustained demand rebound in the second half of 2025 may be kick-starting the office sector’s long-awaited recovery. National vacancy edged down to 14.1% in Q4 from its midyear peak of 14.2%, as absorption turned sharply positive in each of the final two quarters. Leasing activity also improved, though it remains below pre-2020 norms. Average lease sizes are still 15% to 20% smaller than before the pandemic, and limited availability of large premium blocks has prompted more renewals in place, leaving smaller tenants to compete for fewer top-tier spaces.
Return-to-office momentum is building, largely driven by increased attendance among hybrid workers, but remote work levels have not declined, and many companies continue to operate with reduced in-office requirements. This uneven attendance is slowing the pace of recovery and could remain a drag on demand, especially if economic uncertainty prompts cost-cutting measures.
Construction activity has slowed sharply, with only 40 million square feet delivered in 2025, the lowest since 2011, and future completions expected to remain near record lows. Over 30 million square feet were removed from inventory for redevelopment or repurposing. The net effect was an increase of just 5 million square feet, a record low. This lack of supply pressure has helped stabilize pricing and entice institutional buyers back into the market, with sales volume up 20% year over year.
National office real estate trends
- Vacancy in Class A space stands at 20.9%, while Class B vacancy is 12.7%.
- Leasing volume in Q4 2025 approached pre-pandemic levels, but deal sizes remain about 15% smaller than the 2015–2019 average.
- Nationally, absorption appears to have finished 2025 in positive territory for the first time since 2019.
- More than 33 million square feet were removed from inventory in 2025, as demolition and repurposing of underperforming space have increased.
- The current 54.1 million square feet under construction will soon dip below its all-time low, observed in 2011.
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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.
