A “widespread contraction” in tenant demand for commercial office space in April “bears a striking similarity to the March-April 2023 contraction, which coincided with the banking crisis of Silicon Valley Bank, Signature Bank, and later First Republic Bank failing in rapid succession.”
That is the view of an analysis by VTS Data, a real-time and predictive analytics service for commercial real estate. It said the current significant contraction may be linked to global economic policy changes following the Trump administration’s imposition of heavy tariffs on many items imported into the USA from other countries.
The April 2025 data revealed that 17 of 19 markets experienced a decrease in requirement velocity by count compared to the previous month. VTS defines “requirement velocity” as the speed at which tenant requirements are moving through the leasing pipeline, from initial inquiry to signed lease. Additionally, 16 of the 19 markets experienced declines in requirement velocity per square footage. In both cases, the fall was greater than at any time since 2021.
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Total requirement count slumped 23.2% from March to April 2025 and total square footage plummeted 26.4%. In the 2023 crisis, office requirements fell by 25.1% and square footage by 38.2%.
“These [2025] declines represent meaningful contractions in forward-looking leasing activity that warrant investor attention, particularly given their correlation with the timing of recent policy changes,” the report stated.
The steep drop in office space requirements per employee and square footage from March to April this year “suggests the current market response to tariff policy implementation is comparable in magnitude to the significant financial system shock we witnessed in Spring 2023,” VTS commented.
Metros have been differently affected. This time around, the hardest-hit markets by tenant count included Boston, Northern Virginia, and Silicon Valley. However, suburban Maryland and Austin proved resilient. Other markets showed mixed results. In Chicago, requirement count fell 23.6% but square footage rose 23.8%. In San Francisco, there was a 16.7% reduction in the number of transactions but a 9.1% increase in square footage, which the report suggested indicated fewer but larger transactions.
On the more positive side, in 2023, the market immediately bounced back after hitting the April low point. Requirements soared 23% and square footage 54.3% in the following month. If the current contraction follows the same pattern, a significant recovery could follow.
“For investors and industry stakeholders, this analysis suggests maintaining a measured approach,” the report said. While history suggests a strong and immediate rebound is possible after a system shock, “the current administration’s tariff policy is proving to be incredibly fluid, and it remains to be seen what the final state will be, which ultimately will determine where office demand moves directionally and how much of an impact we will witness in the market.”
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