Q1 2025 - Full Report - Office Dynamics

Overview

• Leasing volume slowed moderately from post-pandemic highs in Q4, but reached 50.4 million s.f. in Q1 2025, growing more than 15% compared to Q1 2024.

• Leasing volume over the past 12 months now reflects 89% of typical pre-pandemic activity.

• Occupancy losses returned as net absorption fell to -8.1 million s.f. in Q1, driven in large part by federal lease terminations, contractor sublease additions and inventory removals.

• Downsizing rates continue to stabilize, falling to just 6.6% over the past year.

• Direct asking rents continue to be largely stable, growing by 0.14% QoQ as landlords continue to maintain or increase rents in most cases, and significant discounts have been rare.

• Stabilizing concessions among renewal transactions are helping to drive up effective rental rates.

• Conversion and redevelopment volume remains high at the outset of 2025, and completions fell to their lowest level in over a decade with only 3.5 million s.f. delivered.

• Overall U.S. office inventory declined by more than 10 million s.f. and may fall by an additional 40 million s.f. by the end of the decade.