There’s little doubt that the officer sector has been hit by the one-two punch since 2020. First, there was the pandemic. Second, there were changing workplace behaviors due to work-from-home demands. These factors, in turn, have meant a challenging office market, complete with high vacancies and low absorption.

Or not.

In a video entitled “Can The Office Market Regain its Footing in 2025?” Marcus & Millichap senior vice president John Chang agreed that the pandemic put office demand in negative territory, complete with much higher vacancies. However, for a full understanding, he noted that “you have to peel back the layers and drill deeper.”

Suburban and Urban

During Q1 2025, the suburban office vacancy rate stood at 16%, while those offices in urban cores were at 19.2%, according to Marcus & Millichap metrics. Additionally, “both urban and suburban office absorption have been positive for the last four quarters,” Chang said.

Furthermore, the smaller, newer suburban office properties have done well, with an average vacancy rate of 11.2%. Meanwhile, their older, larger office tower counterparts average a 26.7% vacancy rate.

Added to that, “performance varies greatly on a metro-by-metro basis,” Chang said. “It’s a real patchwork across the country.”

Area Assessments

Chang pointed out that office performance depends on migration patterns, job creation, and state and local politics. These and other fundamentals determine the path of office absorption, which isn’t the same between metros.

For example:

• Dallas office absorption has been in positive territory for the past six quarters

• Charlotte, NC, reported positive office absorption for the past five quarters

• New York City had four quarters of positive absorption

• Other metros with four quarters of positive absorption include Atlanta, Houston, the Inland Empire, Miami, Orlando, Philadelphia, Sacramento and St. Louis

Then, there’s the other side. Chang explained that:

• Oakland, CA, has experienced negative absorption in 10 of the last 13 quarters

• San Francisco space demand has been negative in 10 of the last 13 quarters

• Boston’s absorption has been negative for the past nine quarters

Crystal Ball Time

Looking forward, Chang said the vacancy rate will likely continue to decline due to limited deliveries and increasing back-to-office mandates. While there is a recession risk, “it’s possible that rising unemployment could drive more employees back to the office, actually lifting space demand,” he said.

But the forecast isn’t a given, due to uncertainties surrounding trade policies and the characteristics of any downturns. “Our baseline forecast suggests a modest gain in space demand this year, but a lot of the variables are still up in the air,” Chang said.