Shrinking demand continues to affect the U.S. office market, shooting vacancy up to a record 13.9%, and cumulative negative absorption to nearly 205 million square feet (SF) since April 2020. Buildings completed during the current decade have maintained positive net absorption, but older properties have suffered from an extreme lack of demand.
There is a small silver lining: supply pressure should soon subside. Construction starts in the first quarter registered the lowest on record at just over 4 million SF. Net deliveries are expected to taper off by the end of 2025, which could tighten the market for desirable first-generation space.
National office real estate trends
- Demand is still trending downward, with many tenants shrinking square footage in existing locations or consolidating into fewer locations when their leases expire. Those entering the market for new space in the past six quarters have taken 15% to 20% less space than was typical from 2015 to 2019.
- New leasing volume has remained around 100 million SF for the past six quarters, approximately 12% below the average from 2015 to 2019.
- Around 45 million SF of net supply additions are expected this year, the majority of which are due in the second half. The smaller number of new projects underway suggests that less than half that amount will come to market in 2025.
- Developers completed less than 10 million SF in the first quarter, the lowest amount since early 2013. Even less is slated for completion in the second quarter.
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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.
