Despite 12 consecutive quarters of negative national absorption, signs of stabilization are emerging in the U.S. office market. In Q2 2025, 36 major markets posted positive net absorption, while the four-quarter rolling average improved for the fifth straight quarter—up 49% year-over-year. Demand continues to concentrate in Class A space, with more than half of tracked markets seeing positive absorption in higher-quality assets. Meanwhile, vacancy appears to be nearing its peak as sublease inventory settles and new construction slows to historic lows, signaling a supply-side recalibration that may support a measured recovery.
Key Takeaways
Demand recovery underway: While quarterly absorption remained negative, the four-quarter rolling average improved 49% year-over-year, with 35 markets posting positive absorption over the past four quarters.
Flight to quality continues: Over half of U.S. markets saw positive Class A absorption, reflecting sustained demand for premium office space amid limited new supply.
Supply side stabilizing: Vacancy, sublease inventory, and construction pipeline held steady quarter-over-quarter, signaling improving market fundamentals.
Office Demand Recovery Gains Ground, Despite Broader Economic Headwinds
While national office absorption remained negative in Q2 2025, the U.S. office market continued its slow rebound, with 36 of 92 tracked markets posting positive absorption—led by San Jose, Midtown Manhattan, and Nashville. The rolling four-quarter average rose 49% year-over-year, signaling that flight-to-quality trends and regional strength—particularly across the South, Midwest, and West—are quietly rebuilding market momentum beneath the surface.
Class A Assets Lead Office Recovery as Vacancy Trends Stabilize
Demand for high-quality office space continues to outpace the broader market, with Class A absorption improving 65% year-over-year and turning positive in over half of U.S. markets. While total vacancy reached 20.8% in Q2 2025, the rate of increase is slowing, sublease volumes are down 10% from peak levels, and new construction has dropped to its lowest level since 2012—signaling a maturing correction as occupiers prioritize quality and market fundamentals begin to stabilize.
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Outlook:
Office demand is firming and vacancy may be nearing its peak, but elevated levels will likely persist post-pandemic; as more employers push for in-office presence, leasing is gaining traction—particularly for high-end, service-rich spaces that support culture, experience, and collaboration.
