- Vacancy rates dropped for the fourth consecutive quarter, falling to 23.2% in Q2 as over 10M SF of office space came off the market.
- Office sales surged to $40.8B over the past year, a 69% increase, with Class A and trophy assets making up more than 70% of deals.
- Tenant demand remains below pre-Covid levels, though leasing momentum picked up in key cities like San Francisco and Manhattan.
- Development is limited due to high construction costs, boosting demand for high-quality existing space.
Vacancy Continues To Fall
The US office market is trending upward, with Q2 marking the fourth straight quarter of declining vacancies, reports The Real Deal. The national vacancy rate now stands at 23.2%, down 15 basis points from Q1 and 80 basis points year-over-year, according to Avison Young. Although still above 2021 levels, the consistent improvement reflects rising tenant engagement and reduced supply.
$40B In Deals
Investment activity is rebounding. Office sales volume jumped 69% over the past four quarters, reaching $40.8B. Class A and premium properties made up more than 71% of the activity, as investors continue to favor high-quality, well-located assets.
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Major Cities Rebound
Transaction volume rose significantly in office markets like Manhattan, Miami, Los Angeles, Chicago, Houston, and Dallas. In terms of leasing, San Francisco led with a 61% year-over-year gain, followed by Manhattan at 17.2%.
Flight To Quality Intensifies
Trophy buildings nearly doubled their share of leasing deals in the first half of the year, while demand for Class B and C properties shrank across most metros. This bifurcation continues to define market dynamics.
Tenant Behavior Shifts
Leasing volume in the first six months totaled 138M SF—still 16.2% below pre-pandemic levels. Workplace occupancy hit 60.4% of May 2019 levels, with government and engineering sectors leading the return. Technology and consulting firms continue to trail at around 50%.
New Space Shrinks, Renewals Rise
New tenant requirements in the office market are down 15% compared to 2019, while renewal activity is up 16.2% over the same period. Still, large renewal deals have declined sharply in 2025, reflecting a cautious approach to future office market space needs.
Supply Remains Tight
High construction costs and economic uncertainty are keeping new development in check. This limited pipeline is helping drive demand—and pricing—for existing top-tier space.
Why It Matters
The US office market is stabilizing after years of pandemic-driven disruption. Investors and tenants are increasingly focused on high-quality assets. Rising sales and falling vacancies suggest growing confidence in the sector’s long-term outlook.
What’s Next
Recovery remains uneven, particularly among lower-tier assets. However, improvements in leasing, occupancy, and investment are ongoing. These trends could help sustain the office market’s momentum into 2026.
