“In recent years, hiring surged, but employers had limited leverage to bring employees back to the office. Now, as jobs become harder to come by, employers are in a stronger position to require in-office attendance with less resistance.”

VTS data revealed a disproportionate impact of slowing office demand on New York City and Los Angeles, which previously were the two hubs propelling the asset class' recovery. In fact, they were the only cities to record a year-over-year decline in office demand. While the category fell 4.7% in New York year-over-year, its VODI of 82 still leads all cities tracked in the report with the highest overall score. Los Angeles posted a VODI of 74 despite a 13% decline.

Meanwhile, cities that had been lagging during the office rebound are now emerging as bright spots in the office space, especially tech hubs. San Francisco posted the largest year-over-year increase in office demand, up 32% from March 2024, while Seattle’s VODI climbed 19% over the same period. Boston, which is also a tech-centric metro, led all markets in quarter-over-quarter growth, with demand surging 68% from the previous three months and 22% over the previous year.

“New York and Los Angeles were early leaders in the office market recovery, largely because of strong cultural pressure to return to in-person work and a high degree of industry diversity,” said Ryan Masiello, chief strategy officer of VTS. “In those cities, being physically present in the office was seen as the norm — and that social expectation drove demand back to near-normal levels by the summer of 2021.”

In contrast, cities like Seattle and San Francisco lacked that same cultural push, and even as companies were hiring rapidly, they struggled to bring employees back to the office, said Masiello.

“Now, we’re seeing a shift, as a cooling labor market gives employers more control and workers, faced with fewer options, less power to push back against return-to-office policies,” he said.