Q1 2025 Occupier Outlook - Office

Office Recovery in Sight, but Slow Knowledge Worker Job May Extend Time

Office demand levels have carried positive momentum from the late 2024 into the start of the new year. Net absorption recorded only the third positive quarter in the past 20 quarters. Despite the demand-side gains, supply additions will likely result in continued high national office vacancy. The national picture is highly nuanced, with some markets, led by New York, are performing markedly better, while others are still struggling to put a dent in record high sublease space. While there are continued efforts to bring workers back to the office, early indicators show that there has been only modest increase in office occupancy levels. A tepid growth in knowledge work job creation may further dampen demand. The supply pipeline is rapidly shrinking, and new construction starts are a record low, which could squeeze the already tight market for top-tier office space but alleviate overall supply side surplus.

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