A renewed sense of optimism is emerging in the U.S. office market. After years of uncertainty, fundamentals are beginning to stabilize as we move through 2025. While the sector still faces challenges, improving absorption, declining sublease inventory, and a pullback in new construction are setting the stage for a long-awaited turnaround.
Absorption trends are beginning to shift in a positive direction. In the second quarter of 2025, 36 of 92 tracked U.S. office markets recorded positive net absorption, with demand particularly strong for high-quality Class A properties. The four-quarter rolling average for absorption has risen by nearly 50% year-over-year, a sign that leasing activity is regaining momentum. This recovery is most pronounced in prime markets such as San Jose, Midtown Manhattan, and Nashville, where tenant demand for amenity-rich, modern space is driving growth.
Vacancy remains elevated at around 20.8% nationally, but the pace of increase has slowed considerably. Sublease availability, which surged in the wake of remote work, is now down nearly 10% from its peak in early 2024. At the same time, construction activity has cooled significantly, with new project starts reaching their lowest point in more than a decade. These supply-side adjustments are helping bring the market back into balance, reducing downward pressure on rents and stabilizing occupancy levels.
Investor sentiment is also beginning to improve. Institutional investors and private equity groups are cautiously reentering the market, targeting high-quality assets that are positioned to perform well in a stabilizing environment. Many see opportunity in acquiring properties at discounted values or repurposing older, underperforming office buildings. This renewed capital flow into the sector underscores growing confidence that the worst of the downturn is behind us.
Even so, recovery remains uneven. Class A assets are driving most of the positive absorption, while older Class B and C buildings continue to struggle with higher vacancies and weaker demand. For many of these properties, significant upgrades or adaptive reuse strategies may be required to compete in today’s market. Broader economic and geopolitical risks, including trade tensions and shifting employment patterns, also pose potential headwinds that could slow the pace of recovery.
For landlords, tenants, and investors alike, the message is clear: the U.S. office market is not collapsing but recalibrating. Owners who invest in upgrades and tenant-focused amenities are more likely to attract and retain occupiers, while investors who act now can position themselves to benefit as fundamentals continue to strengthen. Tenants, meanwhile, may find that the window to secure prime space at favorable terms is beginning to narrow as supply tightens and demand improves.
