New York Surpasses San Francisco as Top US Office Market

Markets with Long-Term Drivers Pull Away

According to the recently released VTS Office Demand Index (VODI) Q2 report, office demand cooled from the pace set at the start of the year but remained 9% above year-end 2025 levels. The report, highlighted by Business Wire and VTS, points to a national VODI of 71 at Q2 close—down 12% from Q1—but suggests market recovery is consolidating in metros with deep, long-term growth engines. Despite softer national demand, tech-centric cities and markets tied to government and professional industries saw enough churning demand to set the tone for sector leaders.

With technology continuing to shape national leasing, demand is now increasingly focused in a handful of resilient markets rather than across the board, widening both the opportunity and performance gap between the country’s strongest office hubs and those trailing behind.

The Details

VTS data shows New York outpacing San Francisco as the nation’s top office market, thanks largely to a 113% year-over-year jump in tech leasing demand even as finance sector activity slowed. The trailing 12-month tech demand rose 88% by SF and 44% by requirement count, while the average deal size expanded from around 14,500 SF to 19,000 SF.

Although overall national tech demand dipped QOQ—pulled down by a San Francisco correction after a record-setting Q1—New York’s resilience propelled it to the front. Meanwhile, Washington, D.C., buoyed by government leasing, showed the fastest annual VODI growth among tracked cities, surging 45% YOY. Other metros like Los Angeles built momentum on professional and creative services, diverging from the tech-fueled playbook.

Local Dynamics Reshape the Rankings

The data underscores that local industry drivers, not national headwinds or tailwinds, now define momentum. Washington, D.C.’s 44.7% YOY VODI jump (to 68) reflects record government leasing since the pandemic. Los Angeles’ 16.9% yearly gain signals the power of professional and creative tenancy. By contrast, Boston improved but remained at index lows, while Chicago’s Q2 performance reversed its late-2025 uptick as large-block demand waned. Seattle’s reliance on finance and healthcare tenants kept it in negative territory with a 31.5% YOY VODI decline.

The quarter showed a growing disparity—markets with diversified, future-facing industries are capturing and retaining new office demand even as other cities see temporary bursts dissolve quickly under scrutiny.

Why It Matters

The Q2 trends map a new era for US office markets in which ‘winners’ and ‘laggards’ are increasingly reflect local sector momentum and tenant mix. According to VTS, New York’s tech-fueled surge, with tech demand up 113% YOY, outpaced declines in other industries. That momentum also reflects a broader shift as AI-focused companies increasingly drive leasing activity in the nation’s leading office markets. Across major markets, VODI results confirm that tech, government, and professional services tenants are driving occupancy and leasing velocity. Meanwhile, once-resilient markets without these anchors continue losing ground.

Average office deal sizes are also growing—rising from roughly 14,500 SF to 19,000 SF for tech. San Francisco’s VODI fell sharply quarter-over-quarter following a record Q1, illustrating the volatility still present even among leaders. The report’s ‘local not national’ narrative suggests owners and brokers should fine-tune their strategies to submarket fundamentals and tenant rosters, rather than chasing broad-based recovery themes. As always, data-driven underwriting—backed by platforms like VTS, used on more than 60% of US Class A office space—is quickly becoming an essential business advantage.

What’s Next

VTS expects the market’s bifurcation to persist through the remainder of 2026. With companies increasingly prioritizing metros offering long-term fundamentals—such as talent pools, industry anchors, and civic or tech investment—the performance gap between market leaders and laggards will likely widen. Office demand is forecast to show continued quarter-to-quarter variability as local drivers, industry sectors, and submarket competition shift in the face of changing hybrid work trends and capital markets realities. Landlords and investors with exposure to the most resilient metros will have the best shot at capitalizing on new or expanding tenant demand, while others may need to reposition or rethink assets to remain competitive.