After years of disruption, the U.S. office market is showing early signs of a turnaround, in a development that could reshape how and where many Americans work.
There was a modest decline (down to 22.5%) in national office vacancy rates in the third quarter of 2025, marking the first improvement since 2019, according to JLL. This comes as construction slows and demand begins to stabilize, particularly for newer, high-quality office spaces.
Workforce Demand Refocuses Office Needs
Leasing activity is rebounding, now at 82% of pre-pandemic levels. Notably, major tenants in finance, insurance, real estate, and technology accounted for over 60% of the square footage leased last quarter, suggesting that office demand is concentrating in industries with long-term hybrid or in-person work strategies.
Major players like Amazon and Goldman Sachs made significant commitments to physical space, signaling renewed corporate interest in long-term office use. The return of large-scale leasing activity — up over 50% from the previous quarter — suggests that some companies are looking to expand footprints strategically, not just maintain them, according to BisNow.
A Shortage of New Space May Shift Market Leverage
The pace of new office construction continues to drop sharply. Just under 6 million square feet of new space is currently underway nationwide — a steep decline from 50 million square feet in 2019. With little new supply coming online, particularly in top-tier buildings, the balance of power may begin to shift toward landlords offering high-quality, existing space.
Buildings constructed since 2000 are seeing stronger demand, with vacancy rates dropping over the past year.
In contrast, older buildings continue to lag, further reinforcing the workforce’s shift toward well-located, amenity-rich environments that support flexibility, collaboration, and employee experience.
Gateway Markets and Secondary Cities Diverge
Leasing volume grew by 6.5% in Q3, reaching 52.4 million square feet. Eighteen markets exceeded their pre-pandemic leasing activity, with the strongest rebounds seen in major metro areas like Silicon Valley, San Francisco, and Chicago. These cities — home to dense corporate and tech talent hubs — have led the leasing recovery, even as other cities remain in transition.
This divergence could influence future workforce distribution. As Tier 1 cities reestablish momentum, employers may revisit location strategies and remote work policies, especially in sectors reliant on innovation, in-person collaboration, and access to talent pools.
