After years of contraction, the U.S. office market is showing early signs of stabilization. Cushman & Wakefield's first-quarter 2026 data points to improving demand, steady vacancy and a "sharp pullback" in new supply—signals that the sector is shifting from broad decline toward a selective recovery.
Although the quarter closed with a modest -4.0 million square feet of absorption, the four-quarter rolling total reached a positive 5.2 million square feet, the highest since early 2020. That momentum, Cushman & Wakefield noted, underscores that office performance can't be measured by a single quarter's results.
The recovery is still uneven, but it continues to spread. Over the last four quarters, 57 office markets recorded positive absorption, up from 33 in 2024. Leading the rebound, the New York region posted some of the nation's strongest results: Midtown Manhattan alone logged 8.5 million square feet of absorption, followed by Midtown South with 2.7 million square feet. Northern New Jersey posted 1.8 million square feet, while Westchester County, Fairfield County and Brooklyn contributed smaller but notable gains.
Other key markets turning a corner include San Francisco, with 2.4 million square feet of absorption, Orange County with 2.2 million and Dallas, also with 2.4 million.
"A relatively small group of markets is accounting for a disproportionate share of the softness in the market, and increasingly market-level vacancy is concentrated among a smaller share of struggling buildings," said David Smith, head of Americas insights at Cushman & Wakefield, in prepared remarks.
The national vacancy rate held at 20.2%, just five basis points higher year-over-year, marking the smallest annual increase since 2020. Vacancy declined in 46 of 92 markets, with 22 posting drops of more than 100 basis points. Cushman & Wakefield highlighted San Francisco, Midtown Manhattan, Midtown South, Orange County and Austin as top performers, describing their improvements as a "meaningful shift."
Signs of balance are emerging elsewhere as well. Sublease space dropped in 52 markets by a combined 101 million square feet, down 25% from its Q1 2024 peak and 13.6% year over year. The sharpest reductions—exceeding 1 million square feet—came in San Francisco, Midtown Manhattan, Dallas, San Jose and Minneapolis/St. Paul.
The construction pipeline, meanwhile, has fallen to its lowest point in decades. New completions declined 40% year-over-year in the first quarter, totaling just 16.3 million square feet over the past four quarters. Only 18.6 million square feet remains under construction, down 4.2% quarter-over-quarter and representing just 0.3% of total U.S. office inventory—down from 2.6% in 2020.
That slowdown, along with conversions, demolitions, and repositioning, has trimmed the nation's total office stock by 0.7% over the past five quarters or roughly 38 million square feet. In the past year, 20 office markets saw inventory decline by at least 1%.
"While some markets remain in transition, an increasing number of markets are showing a combination of positive absorption, declining vacancy, and falling sublease space, supported by minimal new construction and increasing conversions," Cushman & Wakefield wrote.
© 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.