**Will 2026 Be the “Year of the Office”? It Depends**
The U.S. office sector has been in a prolonged state of transformation. Even before the COVID-19 pandemic, the industry faced headwinds. However, 2025 marked a shift toward stabilization, with predictions that 2026 may push the pendulum further toward recovery—albeit slowly, incrementally, and unevenly.
Brian Connolly, Founder & CEO of Feasibly, summarized the turning point succinctly: “A notable demand rebound in the third quarter finally halted a three-year decline in national occupancy.” Still, most industry experts agree—progress won’t come from sweeping macroeconomic change, but rather in asset-specific, market-dependent advances.
Gordon Lamphere, Vice President at Van Vissingen and Co., emphasized this asset-specific recovery: “The market’s ongoing recovery is increasingly likely to be slow, uneven, and asset-specific.”
### Key Trends in 2025
Industry professionals identified several major themes affecting the office landscape over the past year:
#### Return to Office Picking Up Pace
Return-to-office (RTO) mandates increased, with many employers embracing hybrid and flexible workplace models. As Steve Quick, CEO of ISS North America, explained, this shift helped boost office space demand.
Office utilization also improved, although still variable by location. “Daily attendance continues to vary widely, with peak days reaching up to 70%, and some markets approaching 80%,” noted Keith Reichert, Director of Research at Newmark.
#### Drop in New Construction
Doug Ressler, Manager of Business Intelligence at Yardi Matrix, reported a sharp decline in construction deliveries for 2025, the lowest since 2013. Only 1.7% of national office stock was tied to pipeline projects—half the rate of the previous year. According to Reichert, only 25 million square feet were delivered, a dramatic slowdown in supply.
#### Rising Absorption and Lowering Vacancies
Despite continued double-digit vacancies, there were signs of stabilization. “We have finally reached somewhat of an equilibrium,” said Lamphere. Connolly noted a “definite plateau effect,” while Reichert and CBRE’s U.S. Head of Office Research Stefan Weiss identified pockets of strong absorption tied to Class A buildings in prime districts.
#### Decrease in Sublease Availability
After several years of space “give-backs,” sublease availability declined notably since mid-2023. This reduction suggests an easing in tenant uncertainty and reassessment of long-term space needs.
#### Lingering Challenges
Not all office assets fared equally. Quick noted that Class B and C buildings continue to struggle. Ressler pointed out that demand remains historically low, and meaningful gains in physical occupancy have yet to occur. “Employment growth in office-using sectors has been flat, and concerns about a potential recession are growing,” he said. Weiss added, “There’s still a large overhang of vacant space that will take time to absorb or repurpose.”
### Office Conversions: A Promising Yet Complex Solution
Amid ongoing vacancies, conversion of office properties into other asset classes—especially residential—has gained momentum. “Conversion activity finally shifted from theory to execution,” said Connolly.
By year-end, U.S. office-to-residential conversion projects reached 70,700 units—a 28% year-over-year increase—accounting for 42% of all adaptive reuse projects nationally, according to Peter Kolaczynski, Yardi Matrix Director of Data & Research.
Still, barriers to widespread conversion remain. Zoning, high costs, and architectural constraints limit feasibility for many properties. “Many buildings don’t convert well due to depth, window access, or structure,” remarked Lamphere. Successful projects, Connolly noted, will depend on discounted acquisitions or municipalities employing broad rezonings to facilitate repurposing.
### Looking Ahead to 2026: What to Expect
#### Persistent Market Distress
The anticipated wave of foreclosures has been delayed by loan extensions and restructurings, Lamphere said. Nevertheless, Connolly warned that distress is peaking. “CMBS delinquency rates for office assets hit nearly 12% in late 2025, the highest since the Global Financial Crisis.”
Kolaczynski noted that a looming wave of debt maturities could exacerbate refinancing difficulties. Many leases signed before 2020 have yet to expire. “More assets will face maturity pressure, and weaker buildings may still be handed back or sold at discounts,” said Lamphere.
#### Location-Based Recoveries
Regional performance will continue to diverge sharply. Kolaczynski pointed to strong leasing in New York City, while West Coast cities like Los Angeles, San Francisco, and Seattle have been slower to rebound.
Reichert and Weiss observed that certain coastal markets—such as Manhattan—are experiencing an expansion from high-end corridors to broader market segments. “In every U.S. market, there are pockets of strength and lagging areas,” Weiss said.
#### Stability and Moderate Rent Growth—for Some
Rental rates are expected to remain stable, with moderate growth for Class A properties. “Effective rents may compress slightly due to elevated concessions,” Reichert said.
However, “Trophy assets can still command record rents,” Connolly added. Kolaczynski concurred, pointing out that tenants are willing to pay a premium for quality and amenities.
#### Trends Defining the Future
Among the most important influencing factors in 2026 will be labor market conditions, the role of AI, and the demand for flexible office solutions.
Weiss highlighted employment conditions as a key variable. “If job growth continues steadily, shrinking office supply and increasing demand could realign market fundamentals,” he said.
Connolly predicted that the rise of AI will enable new, well-funded occupiers prioritizing collaboration-focused, urban office environments. Meanwhile, coworking firms are expected to grow in relevance, providing hybrid solutions for companies balancing DE&I priorities, cost-efficiency, and employee flexibility.
Tenant expectations for hospitality-style amenities are also rising. Features such as wellness centers, curated dining, rooftop terraces, and tech-enabled meeting spaces are becoming key differentiators. “This shift is redefining what ‘premium’ means in office real estate,” Kolaczynski noted.
Weiss also commented on a renewed commitment to urban centers. “Companies are making long-term capital commitments to downtown hubs,” he said. “That trend will continue in 2026, reinforcing strength in central business districts.”
### Conclusion
As we move into 2026, the outlook for the office sector is cautiously optimistic—but exceptionally nuanced. Recovery will not be uniform, nor easy. Geography, asset class, market fundamentals, and tenant expectations will all play pivotal roles in determining whether 2026 will indeed be the “year of the office.”
