Office Occupier Outlook

Office Market Stabilizing But Still Uneven Amid Structural Shifts

A record-low in net deliveries and a sustained demand rebound in the second half of 2025 led to a long-awaited bounce in the office sector. Still, the geographic unevenness in the demand resurgence and the continued stagnation in hiring both suggest that risks remain at the start of 2026. New York alone posted over two million square feet in positive absorption, driven by strong office attendance and steady leasing by financial services firms. Dallas and Houston also performed well, and San Francisco recorded positive net absorption, following an extended decline. Other markets, like Chicago and Los Angeles, are still searching for signs of a turnaround.

Leasing activity has increased but has not yet fully returned to pre-pandemic levels. Lease sizes are still 15 to 20 percent below historic averages, largely due to the limited availability of large blocks of top-tier space. Consequently, larger occupiers are renewing their leases, while smaller tenants are taking up available space in well-amenitized buildings.

Office Tenant View

• As right-sizing trends continue, occupiers remain cautious about major expansions due to macroeconomic volatility and build-out costs.
• Occupants' expectations for improved amenities, services, and workplace experiences are prompting landlords to upgrade spaces to align with flight-to-quality trends.
• Corporate occupiers are stabilizing office portfolios rather than continuing broad downsizing, often renewing in place and demanding flexible layouts and shorter leases to align with hybrid work strategies.

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