Vital Signs Improving – Dec. 8, 2025
With vacancy rates and investment sales volume both headed in the right direction, the much-hampered office sector is regaining its strength
Meta’s Instagram division made the news last week with its five-day-per-week in-office mandate for employees with assigned desks, effective Feb. 2, 2026. The policy outlined by CEO Adam Mosseri allows for no exceptions, although it will take effect later in New York City, where there’s a need to alleviate “space constraints” before requiring all office-based employees to show up.
Not coincidentally, a clutch of year-end and year-ahead reports from major commercial real estate services firms and information providers point to brighter days ahead for the office sector. “While the pandemic heavily affected the performance of office properties, signs of improvement are becoming clearer,” according to Marcus & Millichap.
The firm cited improvements in the nationwide vacancy rate and space absorption over the past six quarters. Green Street noted that absorption turned positive in the third quarter of this year.
Furthermore, Green Street said office-using employment is 4% higher than it was in the pre-pandemic year of 2019, a time when clocking in at the front desk was a long-established norm.
Trepp summed up the current outlook this way: “The office sector is back. Investors are buying, and lenders are writing loans.”
It’s true that some of those investors are paying heavily discounted prices for office assets that are destined for conversion to residential use. Yet that scenario alone doesn’t account for the accelerated sales velocity in office during Q3.
Citing Altus Group data, Trepp reported a 28% year-over-year increase in dollar volume for office during Q3. That compares to a 23.7% Y-O-Y gain for total property sales volume. The year-to-date sales volume increase (9.5%) is smaller, suggesting that investment has gained momentum in recent months.
Driving the increased volume, according to Trepp: “better liquidity and a renewed confidence in the sector.”
Since the office sector is considerably larger than a handful of trophy towers in Manhattan or the Bay Area assets that are seeing a veritable stampede of artificial intelligence tenants, it’s reasonable to assume that this confidence is broad-based. However, “back from the brink” doesn’t mean a return to peak vitality. Trepp compares the YTD office sales volume in 2025 ($47.36 billion, again citing Altus Group figures) to the same period in 2022 ($91.77 billion). Clearly, the sector has a ways to go before reaching that peak.
The same can be said of tenant demand. Marcus & Millichap reported that it has been unevenly distributed, “with tenants generally favoring newer, smaller, suburban offices.” Some of the lowest vacancy rates can be found in Riverside-San Bernardino, Charleston, Cleveland, and Tampa, as well as smaller tertiary metros, such as Knoxville.
“Yet demand is also strong for top-tier, high-amenity Class A buildings in select major markets, including New York City, Atlanta, Miami-Dade and Dallas,” according to Marcus & Millichap. Cushman & Wakefield noted that Class A properties in many markets are nearly full, thanks to tenant preference for modern, fully amenitized spaces.
“For large office users looking to secure high-quality space, the message is clear: if you find the right space, act decisively,” said James Bohnaker, principal economist at Cushman & Wakefield. “There is strong demand for new, high-quality space and not enough of it to go around. And given the limited construction pipeline, it’s going to get even tighter.”
As part of its 2026 U.S. forecast, Avison Young pointed to the rebound in leasing volume we’re seeing in coastal markets such as Manhattan, Boston and San Francisco. “Across the broader U.S. landscape, however, market conditions remain uneven,” reported Avison Young. “Trophy assets continue to outperform, with leasing volumes approximately 13% above pre-pandemic averages, though limited availability may constrain further growth in certain locations. Overall, the trajectory of recovery remains closely tied to both geographic dynamics and asset quality.”
The firm predicted “modest improvements” in leasing fundamentals for next year. Regarding sales volume, Avison Young thinks Q4 of this year could set the pace for 2026, just as Q4 2024 accounted for 30% of the year’s total.
“Should this momentum persist, 2026 could mark a pivotal year of gradual stabilization, characterized by selective growth and continued divergence across markets and asset classes,” according to Avison Young. Given the bleak long-term outlook for office during and after the pandemic, that’s progress.