For the data behind the commentary, download the full Q2 2025 U.S. Office Report.
Economic Volatility Has Yet to Halt Office Market’s Gradual Recovery
The U.S. office market continues to slowly heal. National absorption remained negative in the second quarter, continuing a trend that has persisted for 12 consecutive quarters since demand last exceeded zero. Beneath the surface, however, we continue to observe signs of improvement. The four-quarter rolling absorption total improved for the fifth quarter in a row and is up 49% YOY. During the second quarter of 2025, 36 of the 92 U.S. markets tracked by Cushman & Wakefield Research experienced positive absorption. In 19 of those markets, positive absorption exceeded 100,000 square feet (sf).
Over the past four quarters, absorption has been positive in 35 U.S. markets, led by San Jose (+4.6 msf), Midtown Manhattan (+1.4 msf) and Nashville (+942,000 sf). While the South region continues to lead the way in office-demand recovery, there have been signs of firming across all regions of the U.S.
- Midwest: Tulsa (+575,000 sf), Kansas City (+325,000 sf)
- New York Metro Area: Midtown Manhattan (+1.4 msf), Northern NJ (+509,000 sf), Long Island (+165,000 sf), Brooklyn (+407,000 sf), Midtown South Manhattan (+289,000 sf), Downtown Manhattan (+126,000 sf)
- South: Nashville (+942,000 sf), Atlanta (+487,000 sf), Tampa (+340,000 sf), Greenville, SC (+330,000 sf), New Orleans (+309,000 sf), Roanoke (+234,000 sf), Miami (+201,000 sf), Charleston (+142,000 sf)
- Texas: Austin (+712,000 sf), El Paso (+442,000 sf), Fort Worth (+230,000 sf), Houston (+152,000 sf)
- West: San Jose (+4.6 msf), Salt Lake City (+639,000 sf), Phoenix (+311,000 sf), Reno (+305,000 sf), Las Vegas (+230,000 sf), Inland Empire (+126,000
Quality Is Still Critical to Occupiers
Occupiers have consistently been attracted to quality over the past five years, and the demand recovery is accelerating among higher-quality office assets. While Class A absorption was slightly negative (-2.3 msf) for Q2, it did improve 4.6% QOQ and 65% YOY. Additionally, Class A absorption was positive in over half of U.S. markets (48 of 92) in the second quarter of 2025.
Many of the same markets that had positive overall absorption have also experienced strong positive Class A demand. For example, most of the 11 U.S. markets that have had over 500,000 sf of positive Class A absorption in the past 12 months also had strong overall absorption, such as Midtown Manhattan (+2.9 msf of Class A absorption), San Jose (+2.0 msf), Nashville (+918,000 sf), Brooklyn (+819,000 sf) and Austin (+777,000 sf). However, a segmented recovery is evident, as over the past year 13 markets experienced positive Class A absorption alongside negative overall absorption. These include cities such as San Diego, Charlotte, Baltimore, Columbus (Ohio), Buffalo and Fairfield County (Connecticut).
Vacancy Nearing Peak as Sublease Availabilities and New Construction Settle Down
At midyear, overall U.S. office vacancy stood at 20.8%, up 20 basis points (bps) QOQ and 90 bps YOY. However, the pace at which vacancy is increasing is slowing. A third of U.S. markets saw overall vacancy remain flat or decline QOQ. National Class A vacancy rose slightly but fell in half of U.S. markets, with notable YOY drops (100+ bps) in Brooklyn, Kansas City, Midtown Manhattan, Salt Lake City, San Diego, San Jose, and Tampa.
After declining by 16.1 msf over the previous four quarters, sublease inventory ticked up by 1.6 msf, but remains 10.4% below its Q1 2024 peak. Major declines occurred in San Jose (-2.9 msf), Midtown Manhattan (-1.8 msf), Downtown Manhattan (-1.5 msf), San Francisco (-1.0 msf), and Northern NJ (-1.0 msf). There is little evidence that businesses are listing more sublease space on the market in anticipation of a downturn.
Only 2.3 msf of new office space delivered in Q2—the lowest since Q1 2012. The construction pipeline ended June at 26.1 msf, down 40% YOY and 67% below the 2010 average. Just four markets have over 1.5% of inventory under construction: Palm Beach (5.5%), Austin (2.5%), Cleveland (2.0%), and Midtown Manhattan (1.8%).
For the data behind the commentary, download the full Q2 2025 U.S. Office Report.
