U.S. office demand is strengthening as companies lease more space and existing inventory continues to shrink. The market recorded its fifth consecutive quarter of positive net absorption in the third quarter of 2026, with occupiers taking up a net 6 million square feet. New leases are also getting larger, averaging a 13% increase in tenant footprint, according to CNBC.
At the same time, limited construction and the removal of existing buildings are reducing available supply, particularly for premium offices.
Office Inventory Falls by 45 Million Square Feet
Just 3.5 million square feet of new office space was delivered in the third quarter, matching the near-record low recorded in the second quarter. Meanwhile, 9.6 million square feet was removed from the market through conversions and redevelopment.
The national office inventory has declined by 45 million square feet since the end of 2023. Only 23 million square feet of new office space is currently under construction, restricting the supply of new buildings in the pipeline.
Premium Office Rents Increase by Double Digits
Tight supply is pushing up rents for high-end offices. Effective rents for first-generation trophy space rose more than 20% year over year in the third quarter of 2026. Rents for second-generation trophy space increased 10% as tenants turned to existing premium offices when newer options became harder to find.
Technology Hubs Lead Leasing Activity
Technology companies are driving net absorption in San Francisco and Austin, Texas. Leasing volume in Sun Belt gateway markets increased 13% from a year earlier, while smaller, tertiary markets recovered to approximately 95% of their 2019 leasing volume.
Limited Financing Restrains Office Construction
New construction remains limited despite stronger leasing and shrinking inventory. Office construction this year is running at about 9% of its normal annual supply, according to Willy Walker, CEO of commercial real estate finance and advisory firm Walker & Dunlop.
Walker attributed the lack of new projects to limited equity capital. With just 23 million square feet under construction, the pipeline remains small relative to a market where demand is improving and existing space is being removed.
