The North American office sector is reporting its strongest overall performance since the COVID-19 lockdowns disrupted demand, according to new data from Lee & Associates. For the first time since 2019, the firm notes that office vacancies declined in the second quarter across both Canada and the United States, signaling a broad-based improvement in fundamentals for the asset class.
Lee & Associates reports that tenant growth has returned to the office market, with institutional investors showing renewed confidence in higher-quality, premium assets. This improvement is occurring against a backdrop of limited new office construction and an increase in the redevelopment of older, less competitive buildings. As a result, combined office inventories in the U.S. and Canada declined together for the first time on record, reflecting both constrained new supply and the removal of obsolete space from the market.
In the United States, the turnaround in office performance over the past four quarters has totaled 29,700,000 square feet. After generating net growth of 16,700,000 square feet in the first half of 2026 alone, the U.S. office market is on pace this year to end a six-year period of contraction in tenant expansion. This shift suggests that occupier demand is stabilizing and, in some cases, expanding after several years of downsizing and space givebacks.
Canada is experiencing a similar pattern of improvement. Year-to-date net absorption there totals 4,400,000 square feet, and Lee & Associates indicates that full-year 2026 absorption could surpass the 5,400,000-square-foot figure recorded in 2019. That comparison underscores how current demand levels are approaching or potentially exceeding the pre-pandemic benchmark, even as users continue to reassess space needs and workplace strategies.
Market performance remains uneven across major metros. Lee & Associates highlights New York City, Dallas, Austin, Houston, San Francisco and San Jose as examples of markets that are currently surging. By contrast, Los Angeles, Chicago, St. Louis and Washington, D.C., are described as still seeking stability, with conditions lagging the broader North American trend. This divergence points to differing local demand drivers and varying speeds of recovery.
Overall, the combination of renewed tenant expansion, institutional interest in premium assets, limited ground-up office development and the redevelopment of obsolete properties is tightening available supply in many parts of North America. While not all metros are moving in lockstep, the report suggests that 2026 is shaping up as a turning point year for the office sector relative to the pandemic era, with both the U.S. and Canadian markets showing measurable gains in occupancy and absorption.
