The U.S. office sector showed early signs of stabilization in the third quarter of 2025. Net absorption turned positive for the first time since late 2024, with the third quarter marking the best performance since 2019, led by gains in the East and South regions. Leasing activity improved modestly, reaching just above the prior year’s pace as large markets like Manhattan, Dallas and Austin recorded renewed momentum. Vacancy remained elevated but held relatively steady, reflecting a market gradually adjusting to hybrid work and slower employment growth.
While average lease sizes continue to shrink, demand is shifting toward high-quality buildings and strategically-located assets that meet evolving workplace preferences. Class A properties captured a majority of leasing volume, underscoring the continued flight to quality trend. Sublease availability continued declining after reaching historical highs in 2023, and construction pipelines continued to contract. The near-term outlook remains cautious but is improving as tenants adjust their space strategies, while job growth in education, healthcare and the government sector bolsters underlying demand.
Key Takeaways:
- Net absorption totaled 4.2 million SF, the best quarterly performance since late 2019.
- Vacancy held steady at 20.5%, rising just 10 bps year-over-year.
- Leasing volume reached 56 million SF, up 5% from last year.
- Sublease availability declined 21.8% year-over-year to 154 million SF.
- Class A buildings captured 52% of all leasing, despite representing only one-third of total inventory.
- Average office size per worker stabilized at 122 SF, down 8% from 2020 levels.
