The office sector’s post-COVID struggles may be showing signs of easing. Reports on the U.S. office market for the fourth quarter highlighted the highest net absorption levels in some time, along with “positive trends in leasing activity and rental rates,” despite ongoing challenges related to new supply and capital markets, according to JLL’s U.S. Office Market Dynamics.
Additionally, Colliers’ U.S. Office Market Statistics Report noted a decline in vacancy rates, attributed to a lack of new construction and an increase in buildings being converted for alternative uses. Lee & Associates’ North American Market Reports further pointed out that nearly a quarter of under-construction projects are intended for owner-occupiers.
Analysts from Lee & Associates emphasized that the office market is approaching an inflection point, as employers begin to revise flexible workplace policies established during the pandemic. Both JLL and Cushman & Wakefield echoed this sentiment, noting the decline in available sublease space as a significant positive factor.
Certain industries, including technology, finance, and legal sectors, have stabilized and are now starting to expand their office footprints, which is boosting leasing activity, according to JLL. The ongoing preference for newer, amenitized office buildings continues, but with a shrinking construction pipeline, occupiers are beginning to consider options in slightly older properties, Cushman & Wakefield reported.
Looking ahead to 2025, JLL analysts forecast an optimistic outlook, expecting leasing volumes to grow, driven by demand from large users and a positive trend in tenant requirements. Cushman & Wakefield researchers predict that office vacancy will peak by mid-2025 due to stronger market fundamentals and reduced new construction. They also suggest that obsolete office spaces may require investment or conversion, and downtown areas and central business districts may need to rethink their ideal real estate mix.
These developments point to a cautiously optimistic future for the office market, with stabilizing demand trends and a potentially more balanced supply level in the near term.
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