The U.S. office market in 2025 is showing early signs of stabilization, with construction activity at historically low levels, modest price gains, and coworking continuing to expand, according to Yardi Matrix’s December Office Report.
The office construction pipeline remains significantly below historical norms, with just over 13 million square feet started through November, roughly on par with last year. Projects currently in process or planned represent 1.7% of total stock, down from 3% a year ago, highlighting a more restrained development pipeline.
Currently, 32.2 million square feet of office space is under construction, representing 0.5% of total stock, marking a 44% decline compared with last year. Only three markets expanded their pipelines, including Manhattan, Los Angeles and Phoenix. Boston maintains the largest pipeline with 4.1 million square feet underway.
Vacancy has inched down to 18.5%, but physical occupancy remains flat as employment in office-using sectors shows little growth and recession concerns persist, making new projects increasingly difficult to finance. Some markets stand out as bright spots. Manhattan has very low vacancy and a growing supply pipeline, while San Francisco has seen a significant increase in demand over the past year.
Among the top 25 markets, 16 saw vacancy rates decline in 2025. However, some, such as the Twin Cities, experienced higher vacancy due to tenant consolidations — most notably Ameriprise Financial vacating its one million-square-foot headquarters in Minneapolis. Overall, tenants are consolidating wherever possible, the report said.
For the first time since 2022, the average national asking price per square foot increased, signaling that a bottom may have been reached. Properties sold for $190 per square foot in 2025, up 7.1% from 2024, though prices remain 33% below the 2021 peak. Chicago recorded the lowest average price among the top 25 markets at $64 per square foot, down 27.8% from 2024. Total office sales through November totaled $48.1 billion, reflecting ongoing transaction activity amid challenging conditions.
Coworking continues to grow, filling the gap between fully remote and full-time in-person work, according to Yardi Matrix. In 2025, 22 million square feet of coworking space opened, a 16% year-over-year increase, raising coworking’s share of office space by 30 basis points to 2.2%. Currently, two-thirds of firms offer location flexibility, and 42% have adopted structured hybrid models, according to the Flex Index. As coworking grows, so will competition and smaller operators will need to innovate to remain competitive and capture corporate demand, highlighting opportunities for networking, cost reduction and expanded reach, said the report.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.