For the first time since the pandemic, net absorption of U.S. office space has roughly matched new supply, signaling a tentative but measurable recovery, according to Colliers. The trend reflects rising demand for high-quality office space, limited new construction and the ongoing removal of obsolete buildings.
Demand and leasing are improving, with 53% of markets posting positive net absorption in 2025, Colliers said. Net absorption was positive for the sixth consecutive quarter, with 7.1 million square feet absorbed during the fourth quarter, bringing the year-to-date total to 18.6 million square feet, the highest annual total since 2019.
Manhattan led the country with 15.6 million square feet absorbed, a historical best, followed by Dallas at 2.4 million square feet. The Northeast and South regions posted positive absorption of 17.6 million square feet and 5.7 million square feet, respectively.
The overall office vacancy rate decreased for the third consecutive quarter, reaching 18.2%, down 10 basis points from the previous quarter. Class A vacancy declined to 21.1%, Class B to 16.8% and average central business district (CBD) vacancy stood at 19.2%, down 10 bps from last quarter but up 40 bps year-over-year. Portland has the highest CBD vacancy at 37.1%, reflecting a shift to suburban submarkets.
National asking rents hit a new all-time high at $37.69 per square foot, up 2.3% year-over-year and 1.2% from Q3 2025, with Class A averaging $42.65 per square foot and Class B at $32.28 per square foot. The Northeast commands the highest average at $44.53 per square foot, while the Midwest remains the lowest at $27.48 per square foot. Manhattan, San Francisco, Silicon Valley, Miami and Washington, D.C., hold the five highest rent averages across all classes.
Construction activity remains constrained, with a total pipeline of only 25.8 million square feet, down sharply from the 2019 peak of 158 million square feet. Ten markets account for 62% of the pipeline. Q4 deliveries totaled 5.7 million square feet, while 2025 completions reached just 18.8 million square feet, the lowest annual total in over a decade.
Over a third of new 2025 space was built in the South, with only 14% in the Midwest. Manhattan had 3.9 million square feet under construction, Dallas 2.5 million square feet, Los Angeles 1.7 million square feet, Palm Beach 1.5 million square feet and Omaha 1.3 million square feet.
Limited new supply, combined with the removal of more than 100 million square feet of obsolete space in 2025, is helping stabilize markets and support absorption in top-tier locations. Return-to-office mandates, particularly mid-week, continue to boost occupancy, while investment sales rise as buyers seek discounted properties, according to Colliers.
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