US Office Market Demand Surge Indicates Possible Shift Towards Normalization in 2025

Significant Developments in the Office Market

December 4, 2025, marked a pivotal moment for the office space sector in the U.S., as revealed by the NAIOP Research Foundation's latest forecast. The report highlighted a substantial rise in the demand for office space during the third quarter of 2025, indicating a significant turnaround from previous declines earlier in the year.

Recovery Signs

The report titled "Office Space Demand Forecast, Fourth Quarter 2025" presents a comprehensive analysis of the current market dynamics, economic conditions, and emerging trends affecting office utilization across the United States. Notably, the national net absorption of office space grew by a noteworthy 19.8 million square feet in Q3 2025. This rise is a remarkable shift from the preceding quarter, where negative absorption faired at 14.9 million square feet. This uptick represents the most robust quarterly demand growth for office spaces since 2022. Despite the positive trend, the year-over-year demand growth remains modest, with a total increase of only 600,000 square feet as a result of a decrease in leasing activity earlier in 2025.

Challenges Ahead

Marc Selvitelli, the president and CEO of NAIOP, commented on these developments, stating, "While the third quarter's rebound is a promising sign, the office market remains at a pivotal 'normalization' point." This statement underscores the complex nature of current decisions that firms are making about their space needs amidst a shifting economic landscape.

Key Findings from the Report

The report encompasses several critical findings that highlight the current state of the office market:
1. Broad-based Improvement: For the first time since 2021, all four U.S. Census regions recorded positive net absorption during the third quarter, contrasting with the uniformly negative demand experienced in the previous quarter.
2. Easing Construction Pressures: Only 25.3 million square feet of new office space came into the market over the past four quarters, highlighting a slowdown in construction activities while an increasing number of buildings are being repurposed for residential, hospitality, and data center use.
3. Vacancy Rate Changes: The vacancy rates have slightly increased, rising from 11.7% to 11.9% year-over-year, even as demand continues to strengthen.
4. Tenant Preferences: A distinct bifurcation in tenant preferences is manifesting within the market. Class A+ office buildings are seeing near-full occupancy on peak days, while overall office utilization still hovers below two-thirds of pre-pandemic levels.

Looking Forward

Looking ahead, the forecast anticipates a further increase in net absorption, projecting 20.5 million square feet for the fourth quarter of 2025 and 50.5 million square feet across the entire year of 2026. An additional 28.4 million square feet is expected to be absorbed in the initial three quarters of 2027. However, the report also notes a 50% chance that the recent demand spike is merely temporary, mainly stemming from postponed leasing decisions made earlier.

Selvitelli remarked on the uncertainty, stating, "Much of the near-term outlook hinges on macroeconomic factors, including federal policy decisions, investments in data centers, and consumer spending patterns." The next several quarters will be crucial in determining whether this momentum represents a genuine turning point for the office market or a short-lived rebound caused by temporary market dynamics.

For further insights, download the complete NAIOP Office Space Forecast at naiop.org/officedemand for a more in-depth analysis of the shifting trends within the U.S. office market.

About the NAIOP Research Foundation

Founded in 2000, the NAIOP Research Foundation operates as a 501(c)(3) organization dedicated to supporting entities engaged in real estate development, investment, and operations. Aiming to provide insights into how real properties impact and serve communities across North America, the foundation serves as a valuable resource for industry professionals. Exploring the link between real estate and societal benefits, the NAIOP Research Foundation is committed to advancing the knowledge base of the commercial real estate sector.