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After years of uncertainty, signs of an office market recovery are emerging — not just in New York, but in smaller cities across the U.S., reports CoStar News.
Commercial real estate leaders are pointing to increased leasing activity in markets such as Pittsburgh, San Antonio, Minneapolis, Cleveland, and Kansas City, Missouri, as indicators of renewed confidence in office space.
Executives from major brokerages, including CBRE, JLL, and Cushman & Wakefield, noted during recent earnings calls that leasing activity is spreading beyond gateway cities.
“We are seeing some good momentum across both gateway cities and secondary markets,” JLL Chief Financial Officer Karen Brennan said on the call. CBRE’s CFO Emma Giamartino echoed this optimism, citing growth in cities like Cleveland and Minneapolis.
While the national office vacancy rate remains high at 14%, roughly half of the country’s 50 largest markets have seen leasing demand return to positive territory after years of downsizing (CoStar News). Industry leaders suggest this is partly due to a shift in corporate strategy.
As major companies such as Amazon, Dell, and Salesforce push for more stringent return-to-office policies, demand for premium office space is rising.
“It feels like the office market has bottomed, and I think leasing velocity across markets is picking up,” Jeremy Leventhal, managing partner at Faros Properties (which owns office buildings in New York, Boston, and Pittsburgh), told CoStar News.
In some markets, the lack of new office construction has also fueled demand for well-maintained older buildings.
“Since we’re a market that has not experienced significant new construction, the flight-to-quality conversations have sometimes even resulted in companies moving to older buildings,” said Russell Noll, executive managing director at Transwestern in San Antonio.
Despite positive signs, the long-term outlook remains uncertain. Leasing activity has increased, but much of the recovery remains anecdotal, with landlords and brokers closely watching economic factors such as interest rates and federal policies.
“We have definitely seen an uptick… but there’s still a lot of vacancy to fill throughout the market,” said Brent Roberts, a leasing broker with Lee & Associates in Kansas City.
Still, with the highest level of leasing activity since the pandemic’s onset — 52.9 million square feet in the last quarter alone — the momentum suggests a turning point.
“Ultimately, I think people have come to realize that [remote work] is not as effective as having an office,” Leventhal said.
