Are office buildings making a comeback?
- caskibum-3
- Mar 24
- 2 min read
Office buildings can roughly be defined into three categories. The most expensive offices are called Class A, which is a higher quality building in a prime location with amble amenities. Class B could be an older building still in a good location but usually with less amenities. Class C is an older building and/or located in a suburban market with little to no amenities. Prior to COVID these different Class of building were quite predictable in occupancy and desirability, but now with technology and the flight to suburban neighborhoods Class A & Class B buildings have had a hard time recovering from the “work-at-home” mindset. However, many companies such as Amazon, JP Morgan, Exxon Mobile, AT&T, Tesla, UPS, Boeing and other large and small companies are requiring their employees to return to the office either full time or with a hybrid schedule. So, the question is… are office buildings making a comeback?
According to CommercialCafe, an online publication, it appears that the “national” office vacancies have hit their peak in March 2025 at 19.80% and as of December 2025 have dropped to 18.4%. Marcus and Millichap state in their office overview that “43 of the 50 major office markets noting an increase in occupancy”. The cities with the lowest vacancies as of year-end are Manhattan (13.6%) Miami & Tampa (13.9%), Los Angeles (14.9%), and Boston (15.5%). Some of the most active markets are Houston with a 4.3% improvement, San Francisco with a 3.7%, and Orlando with a 3.1% improvement in occupancy.
Other factors to consider are volume of leasing activity, price per square foot, and new supply. According to Yardi Matrix research publications, the first half of 2025 had $8.7 billion more in leasing activity than the first half of 2024. Additionally, the year-over-year increase in rents was 3.3% higher with Manhattan, San Francisco, and Miami topping the lease rates. As of 2026 there is nearly 31 million square feet of office space currently under construction representing roughly .06% of the total office space, which is slightly down from previous years exhibiting a continued pullback on the market.
It does appear that office buildings may have turned the corner but is this a comeback? Now with larger companies setting the example of requiring employees to return to the office plus with occupancy rates improving overall nationwide are certainly positive factors. However, in most cities’ vacancies are still quite elevated, but with Manhattan and Los Angeles leading the way with the lowest vacancies, Loren Thall from Dominion Corporation, who finances commercial properties including office buildings said, “this is a good sign and should eventually trend better of the smaller cities”. He also mentioned that, “this may not be considered a comeback yet, but office is surely digging out from their Covid days”. From a lending standpoint Loren Thall also said, “I think lenders will continue to proceed with caution financing office properties, but it is looking better every day, especially in some cities”.
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