• Office vacancies set another all-time high, though they are increasing at a more moderate pace.
• Supply-side pressure has all but shut down, setting the stage for recovery in the quarters ahead. Year-to-date absorption is 1.5 million SF.
• Market performance varies, with Manhattan the clear-cut leader in absorption.
• Increasing investment sales at a reset basis are likely to recalibrate market rents across submarkets.
• Economic uncertainty has many occupiers in a wait-and-see holding pattern. The market remains in favor of tenants.

As of mid-year 2025, the U.S. office market appears to have reached its low point, with varying levels of recovery anticipated across the country during the latter half of the year. Most markets are seeing smaller increases in vacancy rates and fewer spaces coming back online compared to the period between 2021 and 2023. Average asking rents are beginning to stabilize. Furthermore, new development remains constrained, with a current pipeline totaling only 31 million SF, a significant decline from the 158 million SF peak recorded at the end of 2019. 

The vacancy rate rose 10 basis points over the quarter to 18.4%, another record high for the U.S. This marks a 40-basis-point increase from mid-year 2024, resulting from the 4.1 million square feet delivered in 2025 Q2 with limited preleasing. However, this was the lowest new construction total added to inventory in more than 10 years, a positive sign for limited upward pressure on vacancy rates from new buildings.

Colliers Insight

Share this with your followers

Net absorption for the second quarter was negative 152,000 SF, ending a streak of three consecutive quarters of positive growth and bringing the year-to-date total to 1.5 million SF. Manhattan continued to lead the country in recovery, absorbing 3.5 million SF during the second quarter. However, many markets are seeing improvement in demand and leasing activity from the lows post-pandemic and expect to see improved fundamentals over the next six to 12 months.

Asking rental rates are starting to moderate. An increasing number of building sales is also contributing to the stabilization, driven by a recalibration of what is considered the market rate. The average asking rent was unchanged over the quarter at $37.18/SF on a full-service basis, though it is up 1.1% from one year ago.

Projections for the second half of 2025 remain clouded by economic uncertainty. While increased leasing activity and growth from 2024 are expected to positively impact market fundamentals, new leasing momentum could stall as companies take a “wait and see” approach to the impact on their bottom lines. Rising investment sales will lead to new building ownership in many markets, attracting fresh capital to support future transactions. As a result, tenants will have more options, as the majority of the country’s office markets remain firmly in their favor.