Split Decisions – May 11, 2026

The extent of the recovery in office is tied not only to asset class, but also to how the tenant plans to use the space

Taken in isolation, some recent Connect CRE headlines from New York City suggest a renaissance of the office sector. Law firm Cleary Gottlieb renewed its lease for 10 floors at Brookfield’s One Liberty. American Express has committed to building a new headquarters, giving Silverstein Properties the impetus to launch construction on the long-delayed Two World Trade Center. And having brought one new tower to full occupancy (One Vanderbilt), SL Green Realty Corp. has done it again with its One Madison Ave. redevelopment. 

More broadly, the U.S. office market posted a modest year-over-year gain in annual absorption last year, the first time since 2019. However, new articles from Lee & Associates and Avison Young make the point that the recovery in the sector is still not across the board. 

“The better question is not whether office is ‘back’ or still ‘broken,’ but where it is actually healing, why there, and why so much of the market is not participating,” according to a Lee & Associates article titled Office’s Uneven Recovery: Where the Market is Finding Its Footing. “The answer lies in four forces: a widening split between high-quality and lower-quality buildings, uneven office-using employment growth, differences in workplace strategy, and a supply environment far more constrained than in past cycles.” 

That constraint on supply becomes even tighter when asset class factors into the equation, as it most emphatically does in the current environment. For many occupiers, it’s Class A or bust, while Class B stock is left begging. Lee & Associates notes that Class A absorbed a net 17.74 million square feet nationwide in the second half of 2025, while Class B posted negative absorption of 10.6 million square feet last year.  

“Many occupiers are no longer looking for more office; they are looking for better office,” says Lee & Associates. “After years of hybrid experimentation, footprint reduction, and capital restraint, tenants still seeking physical space are making sharper decisions about what that space needs to do—better locations, stronger amenities, more efficient layouts, upgraded systems, and a more credible in-office experience.” 

Moreover, the quality of the space isn’t the only factor. There’s also the intent behind the lease. If it’s a headquarters lease—whether renewal or relocation—term length has lengthened since the pandemic, Avison Young says.

Conversely, non-headquarters leases have been trending shorter as occupiers prioritize flexibility and limit long-term risk. In fact, the average Class A headquarters lease term is nearly twice as long as that of a Class B or C non-headquarters commitment, according to Avison Young data. 

Pandemic-era market conditions fueled the surge in term lengths for large headquarters leases, and that trend continues. “Occupiers capitalized on favorable concession packages and locked in base rents below pre-pandemic levels — a strategic move that continues to shape long-term commitments,” Avison Young says in A split market: Large U.S. office headquarters lease terms lengthen as non-headquarters opt for slightly shorter terms. 

“Occupiers are using this moment to lock in long-term value for their headquarters office space, capitalizing on favorable pricing, while keeping everything else more flexible,” said Tucker White, U.S. office lead, market intelligence at Avison Young. “We are seeing this in both relocations and renewals.” 

The Lee & Associates article sums it up as follows: “Office is beginning to heal, but only under specific conditions: where tenants still want physical space, where that demand is concentrating in higher-quality buildings, where local employment and industry mix support office use, and where supply is no longer working against landlords the way it did in prior cycles. The winners are increasingly identifiable—buildings with the right quality, in markets with the right employment base, serving tenants whose workplace strategies still require physical space. The rest of the market is still searching for relevance, recapitalization, or a new use.”