Q2 2025 Occupier Outlook - Office

Office Recovery Slows to the New Normal As Demand Flattens

Hopes for a broad office recovery have been dampened as demand has slowed due to anemic knowledge worker job creation and economic uncertainty. While some markets have seen a notable uptick, such as New York, a majority have seen continued negative absorption and rising vacancy. Leasing activity, which still lags pre-pandemic activity, appears to have stabilized. Still, deal sizes continue to be between 10 to 15 percent below historic levels. Availabilities are ticking lower but remain above 25 percent. Overall rent growth has been stagnant but top-tier buildings remain in demand as occupiers look to upgrade. On the supply side, construction starts have decreased more than expected and new deliveries have slowed due to construction delays. Along with the conversion of office space, fewer future deliveries may bring supply and demand more in balance.

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