U.S. Office Reports

For the data behind the commentary, download the full Q1 2025 U.S. Office Report.

Resilient Office Demand Despite Policy Uncertainty

The shift in economic policies under the Trump Administration has not yet had a noticeable impact on office demand. In the first quarter, the U.S. office fundamentals continued to show signs of stabilization. While absorption was negative again in Q1, the 4-quarter rolling net absorption registered at -35 million square feet (msf), which was a 30% improvement QOQ and a 48% improvement from one year ago. Over the past four quarters, 34 out of the 92 markets tracked by Cushman & Wakefield Research recorded positive net absorption. Leading the way were eight markets with over 400,000 square feet (sf) of positive absorption: San Jose, Midtown Manhattan, Tulsa, Austin, Baltimore, Cleveland, Tampa and Salt Lake City. 

In Q1 2025, office demand was positive in a third of U.S. markets, led by San Jose (+1.8 msf), Phoenix (+486,000 sf), Midtown Manhattan (+448,000 sf), Baltimore (+384,000 sf), Kansas City (+366,000 sf), and San Diego (+332,000 sf). Other notable markets with positive absorption throughout the country include: 

• Northeast: Fairfield County (+289,000 sf), Buffalo (+231,000 sf), Long Island (+76,000 sf) 
• Texas: El Paso (+247,000 sf), Dallas (+156,000 sf), Fort Worth (+117,000 sf) 
• Midwest: Cleveland (+223,000 sf), Minneapolis/St. Paul (+191,000 sf) 
• Southeast: Miami (143,000 sf), Birmingham (+118,000 sf), Atlanta (+114,000 sf) 
• West: Salt Lake City: (+130,000 sf), Reno (+86,000 sf), Inland Empire (+75,000 sf)   

Bright Spots Continue to Emerge for Office  

National vacancy finished the quarter at 20.8%, up 25 basis points (bps) QOQ. While still trending up, the pace of vacancy increases is slowing. The annual increase of 110 bps is the lowest in over two years. Overall vacancy remained flat or declined QOQ in 30 U.S. markets, including Fairfield County, Miami, Kansas City, San Jose, San Diego, Minneapolis/St. Paul, Central New Jersey and Atlanta. 

Sublease space is no longer pushing overall vacancy upwards, as the national inventory of sublease availabilities has declined each of the past four quarters. There is now 130 msf of available sublease space, which is down 9.5% YOY from the most recent peak of 144 msf in Q1 2024. As noted in the past, the sublease market is a precursor of overall vacancy, so this is an indicator that the demand side of the equation is firming up. The amount of available sublease space has declined YOY in two-thirds of U.S. markets and the YOY declines exceed 1 msf in each of four markets: San Jose, Midtown Manhattan, Austin and Midtown South Manhattan. 

The office construction pipeline continues to contract, alleviating much of the supply-side pressure that has existed over the past five years. The current under construction pipeline totals 26.2 msf, down by nearly half from Q1 2024 and at just one-fifth the Q1 2020 pipeline (136 msf). New deliveries totaled just 4.1 msf, the lowest quarterly total in over 12 years (3.9 msf delivered in Q4 2012). The construction pipeline represents 0.5% of current inventory, just a third of the 25-year historical average of 1.5%. There are only ten U.S. markets with construction pipelines above 1% of current inventory and none of those markets exceed 2.6%. By comparison, a year ago, there were seven markets with construction pipelines exceeding 3% of inventory, led by two that were above 6.5%.

The Longer Uncertainty Lasts, the More Impactful It Will Be 

Office has held up well so far, but the longer the policy uncertainty lasts, the more damaging it will likely be. We are already observing signs of weakness emerging in the economic data. Nominal retail sales have been weaker so far this year, which is perhaps an early indication that the consumer is starting to pull back. Jobless claims remain low but are drifting higher. Layoff announcements spiked in March.¹ Business uncertainty is at all-time high and CFO optimism is declining,² all of which could lead to hesitations in long-term investments (including leases).   

For the data behind the commentary, download the full Q1 2025 U.S. Office Report.