The U.S. office sector closed 2025 with its strongest momentum in several years, as net absorption accelerated in the fourth quarter and delivered the first full year of positive demand since 2019. Occupancy gains were recorded across all regions and market sizes, led by the East and secondary and tertiary markets, with notable rebounds in Manhattan, Austin and Cleveland. Leasing activity remained stable overall, while demand continued to concentrate in higher-quality assets. Vacancy remains elevated but edged lower during the quarter, suggesting conditions are gradually stabilizing as tenants continue adapting space strategies in a hybrid work environment.
Although lease sizes remain smaller than pre-pandemic norms, demand is increasingly focused on modern, well-located buildings that support evolving workplace needs. Class A and trophy properties continue to capture a disproportionate share of leasing activity, reinforcing the ongoing flight-to-quality trend. At the same time, sublease availability continues to decline from its peak, and the construction pipeline has contracted sharply, helping limit future supply pressure. While employment growth across office-using sectors has moderated, strength in education and healthcare employment continues to support longer-term demand fundamentals as the market transitions toward a more stable footing entering 2026.
Key Takeaways:
- Net absorption totaled 9.5 million SF in 4Q, contributing to 12.5 million SF of positive absorption for 2025, the first positive full year since 2019.
- Vacancy declined to 20.4%, down 10 basis points quarter-over-quarter, suggesting vacancy may have peaked.
- Leasing activity reached nearly 55 million SF, largely stable year-over-year as activity settles into a new steady state.
- Sublease availability fell 20.2% year-over-year, continuing a steady decline from 2023 highs.
- Four- and five-star properties captured roughly 52% of leasing activity, despite representing only about one-third of total inventory.
- Average office space per worker stabilized at 117 SF, down about 8% from 2020, signaling space reductions have largely leveled off.
