Office leasing volume has moved decisively upward in the last several quarters, yet the character of the recovery is anything but conventional. Despite a nearly full rebound in the number of new lease transactions, the typical lease commitment has shrunk dramatically compared to the years leading up to the pandemic. Data from the most recent quarter shows total U.S. office leasing at around 100 million square feet—a number that remains shy of pre-pandemic averages—but with an unmistakable shift: “The number of deals getting done has fully recovered… but the average size of those is down, you know, 15 to 20%,” Phil Mobley, national director for office analytics at CoStar, tells GlobeSt.com.
Large Tenants Reshape Leasing Patterns
This reduction in the average lease size tells a more nuanced story than aggregate square footage alone. For several years, the most prominent driver was large corporate tenants making downward adjustments to their footprints as workplace strategies evolved. Many of these organizations, facing greater employee flexibility and reduced space needs, opted to renew or restructure leases at a smaller total footprint rather than expand or relocate. As a result, transactions that previously accounted for significant chunks of leased space—in the range of 100,000 square feet or more—have commonly contracted to the 75,000- to 80,000-square-foot range or below, as Mobley observed.
Smaller Tenants Take the Lead
But the dynamics did not stop there. In the aftermath of the period dominated by right-sizing among the largest occupiers, a shift unfolded. Many big organizations, especially in sectors like technology, have stabilized their headcounts or even downsized. Rather than seeking new space, they are now opting to stay put, effectively leaving the field open for a growing number of smaller tenants. This rise in smaller-space users in the leasing mix further downward pressures the average deal size.
“They had as much space as they needed, and so that left the market open for smaller organizations to kind of dominate… more smaller players, and more of the big guys were just staying,” Mobley said.
Supply Constraints Deepen the Trend
The most recent phase in this trend, however, is not just about tenant demand but also centers on evolving supply-side constraints. Construction activity for high-end, modern office product has been at historic lows for more than a year, limiting the availability of new, premium space in core urban markets. Even larger occupiers who might otherwise be in the market for long-term leases in newly delivered buildings find fewer options to consider. This has sustained, and perhaps intensified, the shift toward more small-space leasing—and as Mobley argues, this environment will likely persist for several years given the lag in new construction:
“There is not going to be appreciable new supply available for two or three years, at least… the amount of space in those new buildings… is going to be at an all-time low of around 1% of all inventory before it starts to recover”.
Flexible Strategies Guide the Future
Underlying these office market movements is modest job growth in professional and technology-centric sectors, along with a broader reassessment by major employers of the necessity of long-term commitments to “growth space.” The pandemic underscored the feasibility and appeal of workplace flexibility, freeing tenants from the assumption that they must lock in space for potential future expansion.
“The pandemic experience taught us that occupiers can be a lot more flexible… they don’t have to make those long term commitments to growth space. They can focus more on the space needs of their current workforce,” Mobley noted, pointing to a likely enduring influence on leasing patterns even as broader demand stabilizes.
A New Definition of “Normal”
Taken together, these shifts represent a substantial recalibration of what constitutes normal in the office leasing environment for this decade. While the total volume of new office leasing may eventually return to earlier highs, the deals underpinning that volume are unlikely to resemble those of prior cycles. Instead, the anatomy of the average office lease—smaller, more tactical, and more precisely matched to actual need—now reflects a complex interplay of evolving corporate priorities, constrained high-quality supply and enduring shifts in workplace strategy. The result is a market that, even in apparent recovery, remains fundamentally changed.
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