For the data behind the commentary, download the full Q2 2026 U.S. Office Report.
Office Market Demand Momentum Persists
Even in the face of slow office-using employment growth and other economic uncertainties, companies are out in the market leasing office space. Total leasing volume continues to improve and, while net absorption in Q2 2026 was slightly negative (-360,000 sf), the 4-quarter rolling demand total hit a six-year high of +14.3 msf. This marks seven straight quarters of improvement in annualized absorption.
Demand improvements are increasingly broad-based. Net absorption over the past year has been positive in 60% of U.S. markets (55 of the 92 markets tracked by Cushman & Wakefield Research), and vacancy has declined both quarter-over-quarter (QOQ) and YOY in over half of U.S. markets. The largest YOY vacancy declines have occurred in gateway and gateway-tangential markets such as San Francisco (-365 bps), Orange County (-335 bps), Midtown Manhattan (-265 bps), Midtown South Manhattan (-230 bps), Westchester County (-245 bps), Fairfield County (-205 bps), Long Island (-200 bps), Brooklyn (-175 bps), and San Mateo County (-80 bps). In total, there are 25 different U.S. markets with annual vacancy declines over 100 bps.
In addition to significant direct leasing activity, the vacant available sublease inventory continues its steady decline. Nationally, available sublease space is down 15% YOY and 28% below its Q1 2024 peak, ending the most recent quarter at 96 msf. Sublease inventories have declined over the past year in two-thirds of U.S. office markets. The largest absolute drops have been in many of the markets with the biggest vacancy declines, but sublease space is also down significantly in markets where vacancy appears to just now be peaking, such as Denver (-827,000 sf) and Los Angeles Non-CBD (-556,000 sf).
Quality Matters as Class A Buildings Continue to Outperform
Tenants have been flocking to the highest quality assets for years now, and the recovery is spreading to commodity Class A space slightly down the quality spectrum. Class A assets are capturing a disproportionate share of tenant demand, given occupiers’ ongoing focus on employee experience, location, amenities, and the workplace as a performance lever for team building, career development, and productivity.
Accordingly, Class A office fundamentals are improving more quickly than the broader market. Vacancy in Class A buildings is down 50 bps YOY nationwide, having declined in two-thirds of U.S. markets. Vacancy declined by more than 100 bps YOY in 38 different markets, led by Tucson, Las Vegas, Orange County, Rochester, Kansas City, Long Island, Richmond, and Midtown South Manhattan.
Net absorption in Class A buildings totaled +4.4 msf in the most recent quarter. The 4-quarter rolling total improved to +24.5 msf, the highest national total since mid-2020. Over the past year, Class A absorption was positive in 60 U.S. markets, exceeding 500,000 sf in 14 of those. The top performers include Midtown Manhattan (+8.5 msf), Dallas (+3.1 msf), Orange County (+2.1 msf), San Francisco (+1.9 msf), San Jose (+1.7 msf), and Cleveland (+1.4 msf).
Reimagination of Office Is Ongoing
Supply-side dynamics are supporting the recovery as construction slows. Over the past four quarters, office completions totaled 15.6 msf, down 24% YOY and marking a 14-year low. Deliveries represented just 0.3% of inventory, down from 0.6% in 2024, with only Austin, Cleveland, Puget Sound Eastside and Midtown Manhattan exceeding 1.0%.
Future deliveries should remain muted, with the pipeline below 20 msf for a third straight quarter. Space under construction rose 2.9% QOQ to 19.7 msf, still less than 30% of the long-term norm. Only five markets exceed 1 msf—Midtown Manhattan, Dallas, San Jose, Los Angeles Non-CBD and Palm Beach—limiting oversupply risk given tightening vacancy and modest pipelines.
While new construction activity has slowed, there has been an increase in conversions, repositioning, and demolitions of less competitive office space. U.S. office inventory is now down 0.6% over the past five quarters having shrunk by 33 msf. Look for this trend to continue especially in urban submarkets that need a better mix of real estate uses.
For the data behind the commentary, download the full Q2 2026 U.S. Office Report.
