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The North American office market took a split path in 2025. For the first time since 2019, the United States posted an annual gain in office occupancy, while Canada continued to face lingering weakness made worse by economic uncertainty and an ongoing trade dispute with the U.S, according to the Lee & Associates new Q4 2025 North America Market Reports.
U.S. Breaks a Six-Year Losing Streak
U.S. office demand turned positive in 2025 after six straight years of decline. Companies leased just under 1 million square feet more space than they gave back, ending a cumulative loss of 215 million square feet since 2019.
The turnaround was driven largely by a strong second half of the year, when tenants absorbed nearly 18 million square feet of Class A office space. That growth helped offset continued weakness in Class B buildings, which ended the year with more than 10 million square feet of negative absorption.
As a result, the national office vacancy rate edged down slightly, finishing the year at 14.1%.
Premium Space Leads the Recovery
The recovery was concentrated in newer, higher-quality office buildings. Limited new construction — combined with increased demand for premium space — helped stabilize the market.
Only about 40 million square feet of new office space was delivered nationwide in 2025, the lowest level since 2011. After accounting for demolitions and redevelopments, total office inventory grew by just over 5 million square feet, a record-low increase.
Big Cities Show Mixed Results
Office performance varied widely across major U.S. markets.
New York City led the way with more than 4 million square feet of net tenant growth, supported by rising office attendance and steady leasing from financial services firms. Dallas–Fort Worth and Houston also posted strong gains, reflecting population growth and healthy local economies. San Francisco reported nearly 2.7 million square feet of net growth.
Other large markets continued to struggle. Washington, D.C. saw tenants give back more than 3.5 million square feet. Chicago, Los Angeles, Philadelphia, Boston, and Atlanta all recorded significant occupancy losses, highlighting how uneven the recovery remains.
Attendance Is Rising, Hiring Is Not
One major obstacle to a stronger rebound is slow employment growth in office-using industries. Federal payroll data shows there are roughly 400,000 fewer workers in key knowledge sectors than at their peak in early 2023.
That hiring slump has been partially offset by higher office attendance. Miami now leads the country, with office attendance at 84% of pre-pandemic levels. New York (77%) and Dallas (74%) are also well above the national average of 64%.
Canada Faces Continued Headwinds
Canada’s office market remains under pressure. After adjusting for changes in how space is classified, national office absorption was negative 5.6 million square feet in 2025.
That said, newer Class A buildings in major downtown cores are holding up better. In Toronto’s financial district, availability in top-tier buildings is close to zero, suggesting demand remains strong for high-quality space even as the broader market struggles.
Office Investment Still Lags
Office investment activity remains subdued across North America. Quarterly office sales volumes averaged about $4 billion in 2025 — roughly half of pre-pandemic levels and far below transaction activity in industrial and retail real estate.
Investor interest has been slow to return, particularly given economic uncertainty and concerns about job growth tied to trade tensions.
Snapshot of Key Market Trends
- Lowest vacancy rates: Vancouver (7.8%), Miami (8.8%), Cleveland (8.8%)
- Highest office rents: New York ($60.05/SF), Miami ($53.96/SF), San Francisco ($52.01/SF)
- Highest sale prices: New York ($525/SF), Vancouver ($455/SF)
- Most construction underway: New York, Boston, Seattle, Dallas–Fort Worth, Toronto
- Lowest cap rates: Vancouver (4.6%), Toronto (6.8%)
