Will the Office Market Finally Stabilize in 2025?

The office market has been through a turbulent few years, marked by record-high vacancy rates, shifting work patterns, and economic uncertainty. As February of 2025 passes, industry experts and investors alike are asking the same question: will this be the year the market finally stabilizes?

Signs of Potential Stabilization

Several indicators suggest a potential shift. 

A recent CBRE report highlights ten key signs of office market stabilization, including a slowdown in sublease availability and increased leasing activity in select markets (CBRE, “10 Signs of US Office Market Stabilization”). 

In San Francisco, we at IPG have noticed modest but promising signs of recovery, particularly in high-quality, well-located properties that cater to tenants seeking a premium workplace experience.

The Role of AI and Tech Driving Demand

AI and tech firms continue to show a strong appetite for office space. According to industry sources, companies in these sectors are securing leases to accommodate growth and establish innovation hubs (PERE News, “Look Ahead 2025: Hines Sees Early-Cycle Office and Retail as Solid Bets for Outsized Returns“). This trend, combined with the ongoing return-to-office efforts by many companies, has added momentum to the recovery narrative.

Cautious Optimism Amid Lingering Challenges

While positive signs exist, challenges remain. 

A report from Capital Economics indicates that total returns are expected to turn positive in 2025, yet offices will continue to weigh on the broader commercial real estate market (Capital Economics, “US Commercial Property Outlook”). Persistent vacancy rates and the uncertain long-term trajectory of hybrid work policies are significant variables.

Investment Considerations

So, should investors jump back into the office market? 

Hines, a prominent global real estate firm, views this as an early-cycle opportunity, particularly in the office and retail sectors where valuations have adjusted significantly. Their research suggests that well-positioned, modernized offices in dynamic markets could offer outsized returns for those willing to take on calculated risks.

A Local Perspective: San Francisco’s Gradual Shift

San Francisco, one of the hardest-hit office markets during the pandemic, is beginning to show signs of resilience. We have observed incremental increases in leasing activity, particularly among companies prioritizing top-tier spaces. However, the path to stabilization remains uncertain, and sustained demand across the broader market has yet to materialize.

A Market in Transition

The data paints a picture of a market in flux. 

While there are promising signs of stabilization, especially in premium properties and innovative sectors, broad-based recovery is not guaranteed. For investors, 2025 may present opportunities to enter the market at a discount—provided they remain selective, data-driven, and patient.

The question remains: will this be the turning point for the office market? Only time will tell, but the indicators suggest we might be witnessing the early stages of a more balanced landscape.