Is The U.S. Office Market Really Rebounding?

Dec 2

The United States office market has taken quite a hit since COVID-19, halting one of the country's strongest asset classes, putting it back decades. Removing companies from the office for a few years established new expectations and approaches to how businesses operate. The idea of working from home prior to 2019 faced significant opposition, until employees were forced to do so, creating a worldwide experiment. The result of this experiment posed a new question: could employee productivity remain high enough in a work-from-home environment to justify its continuation? The answer to this question wasn't as blanket as yes or no, as the value attributed to employees working from home is dependent on the employer.

Major US employers like CrowdStrike and Allstate have continued to embrace the work-from-home model even today, offering varying options for their employees. In contrast, many others have returned to their pre-pandemic in-person requirements. The issue with companies being more open to employees working outside of the office, is that doing so has led to a complete degradation of the US office market, leaving lower-class office buildings across the country with record-high vacancies.

The United States office asset class was in a healthy position right before COVID pulled millions of workers out of the office. In Q1 of 2019, Cushman & Wakefield reported a positive net absorption of 6.7 msf across the US, with major cities such as San Francisco, Seattle, and Raleigh/Durham boasting vacancy rates of 5.5%, 7.8%, and 8% respectively. New Construction was coming to the market in droves, with major cities leading the way. Midtown Manhattan, Silicon Valley, and Austin, Texas saw 14.5 msf, 6.6 msf, and 5.6 msf in new construction, respectively. The United States Office Market was in a strong position at the time, as evidenced by key performance indicators.

Once the pandemic hit and employees were forced out of the office, a downward spiral ensued. In 2023, according to CommercialEdge, the average office property was estimated to be worth roughly 25% less than its pre-pandemic valuation, with some properties experiencing even more significant declines depending on their class. Several factors, including negative net absorption, high vacancy rates, and oversupply of new construction drove this steep decrease. According to Cushman & Wakefield, 2020 took the brunt of the impact, recording negative net absorption of over 70 msf while simultaneously delivering nearly 60 msf of new office space.

As of Q3 of 2025, the cities previously mentioned, San Francisco, Seattle, and Raleigh/Durham, hold vacancy rates of 33.6%, 31.8%, and 23.3% respectively. Vacancy rates across the country have proved highly inelastic, as many US submarkets continue to experience negative changes despite other positive market indicators. While many smaller markets are still in the process of reaching a definitive turning point, the US as a whole has seen its vacancy rates decrease by 20 bps to 18.8%, marking the first year-over-year decline since 2020, according to CBRE. Major markets such as Midtown Manhattan, Fort Worth, and San Francisco are the driving forces behind this drop, all boasting at least a 90-basis point decrease in the last year. Net absorption has also experienced a sharp turnaround. According to CBRE, "The US office market recorded its sixth consecutive quarter of positive net absorption in Q3".

One of the major contributors to this decline in vacancy and increase in net absorption is the decrease in new deliveries. New deliveries for 2025, through Q3, have totaled 13.4 msf, a 50% reduction from a year ago and the lowest for the first three quarters of a year since 2012. Additionally, numerous major US companies, including Amazon, Citigroup, and AT&T, reimplemented mandates requiring employees to be in the office five days a week, with many others increasing their mandates to three or four days.

It's vital to highlight the market discrepancy between Trophy or class A office space and everything below it. According to Cushman and Wakefield, "Fourteen markets posted positive Class A absorption despite overall negative absorption, including Downtown Manhattan, Houston, San Diego, Raleigh/Durham, Pittsburgh, and Tucson." Larger companies are driving this demand to create a more appealing office environment. Additionally, roughly “60% of all markets experienced positive net absorption for class A office space." Major cities with top-tier office space are bearing the brunt of the market turnaround, ultimately overshadowing areas that continue to worsen.

With several positive indicators, it's realistic to expect the recovery in office markets across the US to continue, assuming no significant macroeconomic changes. Unfortunately, recent reports from several Fortune 500 companies suggest otherwise. On October 28, 2025, Amazon slashed 14,000 jobs, citing the need for AI innovation as the reason. Additionally, HP plans to cut 6,000 jobs by 2028, citing AI implementation as its reason. With many companies following suit, reaching pre-pandemic office-market levels may be out of reach for lower-cost space.

Overall, the office market appears to have finally made some positive movement, despite Class A space making up the majority of the improvements. As for a complete rebound, we are still a long way from pre-pandemic levels, even if we factor out the impact of AI. Keeping a close eye on how companies are responding to changes in AI advancements in the coming years is vital for projecting in this market, as the actual impact is yet to be seen.

Sources:

Cushman & Wakefield - Q3 2025 United States Office Report

Cushman & Wakefield - Q1 2020 United States Office Report

CBRE - Q3 2025 United States Office Report

Commercial Property Executive - Office asset values slide amid challenges

Business Insider - Companies that signaled they are replacing workers with AI

Business Insider - Companies ordering employees back to the office