Dr. Gleb Tsipursky – The Office Whisperer
Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
Drew Jones – Design & Innovation
Jonathan Price – CRE & Flex Expert
After years of contraction and uncertainty, the U.S. office market is beginning to stabilize — but not by returning to its pre-2020 structure. Instead, the sector is reorganizing around hybrid attendance, higher-quality buildings, and slower growth expectations.
A new report from Colliers indicates activity is expanding across more metro areas, with improving leasing fundamentals expected to continue through 2026 as employers finalize long-term workplace strategies.
Attendance Is Back, but Not Five Days a Week
Return-to-office policies are pushing more workers back into buildings, lowering the share of fully remote employees. Occupancy patterns, however, have settled into a consistent rhythm: peak usage occurs mid-week, while Mondays and Fridays remain lightly attended nationwide.
Some companies that previously reduced space are now expanding again to accommodate staff presence. Even so, employers are moving cautiously, keeping hiring lean and using technology to cover gaps rather than rapidly increasing headcount.
The result is a workplace that supports in-person collaboration but no longer depends on daily attendance.
Supply Shrinks as Obsolete Offices Disappear
The recovery is being helped less by booming demand and more by shrinking supply.
More than 100 million square feet of outdated office space was removed from inventory in 2025, largely through conversions to other uses. New construction has slowed to historically low levels, allowing demand to catch up for the first time since the pandemic.
Vacancy rates have begun to decline, reaching 18.2% after peaking earlier in the year. Over half of U.S. markets recorded positive absorption, with national occupancy gains continuing for six consecutive quarters.
Performance varies widely by location and building quality. Premium buildings attract tenants, while older properties struggle to compete — a divide that continues to reshape downtowns.
High-Quality Space Leads the Market
Tenant demand is concentrated in newer, amenitized properties. Many companies are upgrading rather than expanding, trading larger footprints for better buildings designed for hybrid use.
Major cities showed mixed progress:
- Manhattan posted record absorption and leasing comparable to pre-pandemic levels
- Dallas and Silicon Valley expanded alongside growth in finance and AI sectors
- Boston and Detroit improved late in the year after earlier declines
Meanwhile, some central business districts continue to lag. Portland recorded the highest downtown vacancy rate as companies shifted toward suburban locations.
Investment Returns, Driven by Discounts and AI Demand
Office investment rose to $73.3 billion in 2025, a 15.8% increase year over year, though still far below 2021 levels. Buyers are targeting discounted properties, often planning renovations or conversions.
Technology demand is also influencing capital flows. The Bay Area saw the largest increase in investment volume, driven in part by leasing from artificial intelligence firms.
Across multiple markets, buildings are trading specifically because they may be redeveloped rather than reused as offices.
Sublease Space Continues to Decline
Excess office space — a defining feature of the post-pandemic market — is steadily shrinking. Sublease availability has fallen for more than two years, dropping 16.4% year over year.
Expiring leases, landlord takeovers of vacant suites, and building conversions are steadily removing surplus inventory. Remaining sublease options are concentrated in higher-quality buildings, especially large blocks suited to major tenants.
Rents Rise Even as Expectations Reset
Average U.S. office rents reached a record $37.69 per square foot in 2025, though growth is slowing and slight declines are expected in 2026 as tenants maintain negotiating leverage.
Prices vary sharply by region and building class:
- Northeast markets remain the most expensive
- Midwest markets remain the least expensive
- Class A rents rose modestly while Class B saw stronger percentage gains from lower bases
Companies are paying for quality rather than quantity.
A Market Adjusting to Hybrid Work
The office sector is no longer defined by expansion but by recalibration. Companies are keeping offices, yet using them differently — fewer days, better spaces, and more targeted footprints.
Now, leasing and investment decisions are becoming hyper-local, based on individual market fundamentals rather than national expectations.
Rather than a full return or full retreat, the office market is settling into a hybrid equilibrium where demand exists, but only for the right buildings in the right places.
