Office Market Recovery Gains Traction: But Remains Uneven

Source: CoStar

After several challenging years, signs of life are returning to the U.S. office sector. 

The pace of occupancy losses has slowed significantly, and a rise in leasing activity suggests a recovery is finally taking shape. But while momentum is building, the rebound remains concentrated in just a handful of major markets—highlighting the long road ahead for the broader sector.

NYC Leads the Way

Among large U.S. office markets, New York City stands out. According to CoStar, the city has posted positive net absorption—meaning more space is being occupied than vacated—in each of the past four quarters. In total, roughly 5 million square feet of office space has been re-occupied, equal to 0.5% of the city’s total inventory.

This growth has been fueled by a resurgence in financial services hiring and the country’s strongest rebound in office attendance, per Placer.ai. Tenants are increasingly targeting premier space in Midtown Manhattan’s newest office towers, further accelerating the local rebound.

A Limited Number of Winners

Despite these gains, only five of the 12 largest U.S. office markets (each valued at over $50 billion) have seen positive net absorption over the past year. Among them, Dallas-Fort Worth and San Jose are the only two markets whose recovery has approached the scale of New York’s.

More broadly, just 27 out of the 48 markets with at least $10 billion in office asset value have recorded positive absorption over the past 12 months. That’s a stark contrast to pre-2020 conditions, when about 90% of these markets typically saw growth during any given year.

Headwinds in Gateway Markets

Some of the nation’s traditional office strongholds continue to face challenges. Boston, in particular, has experienced the steepest occupancy losses in the last year, largely due to a pullback from biotech tenants. Seattle did see absorption turn positive in Q1, and San Francisco’s leasing activity is showing promising signs—suggesting it may not be far behind.

Smaller Markets Show Resilience

Across smaller office markets, which are often less vulnerable to remote work trends, aggregate occupancy rose by nearly 7 million square feet over the past year. However, this increase represents just 0.2% of total inventory, compared to the 0.7–0.8% growth typical in the late 2010s—a reflection of today’s softer job market.

What This Means for the Sector

While recovery is underway, it’s clear that the rebound is not yet widespread. A few major metros are pulling ahead, but most others are still waiting for demand to stabilize. As companies rethink how and where they work, the office sector is likely to face a prolonged period of adjustment—with opportunity emerging unevenly across geographies.

At IPG, we’re tracking these shifts closely. Whether you’re repositioning a portfolio, considering an office relocation, or planning long-term investments, understanding where and how recovery is unfolding is critical.Looking for office opportunities in markets on the upswing? Connect with an IPG advisor to explore what’s next.