Chapter 3
Office
U.S. Real Estate Market Outlook Midyear Review 2026
5 Minute Read
5 Minute Read
Midyear Outlook
- Office leasing activity is expected to continue increasing in the second half of 2026, primarily in gateway markets. Tech companies will be a driving force of this demand after accounting for 21% of leasing activity in H1, rivaling their peak share in 2019. According to CBRE’s 2026 Americas Office Occupier Sentiment Survey, 64% of tech firms plan to grow their footprint over the next three years, up from 41% last year. And the largest tech occupiers, which are particularly focused on AI development, are signing long-term leases.
- We continue to expect office-using employment to rebound in H2 2026, albeit at a modest pace. This improved job market should contribute to the continued recovery of office fundamentals. There are also growing signs of increased conviction on the part of occupiers. Office lease terms have been expanding since 2024 across all major industry sectors, particularly among the largest users where lease terms have expanded by 11 months. Two-thirds of respondents to CBRE’s 2026 Americas Office Occupier Sentiment Survey said that their company plans to maintain (28%) or expand (38%) its space over the next three years.
- This improved demand led by tech occupiers is happening at a time of little new supply growth. Demolition and conversion activity outpaced construction completions in 2025 for the first time on record. This gap is expected to widen further in 2026. As a result, year-end 2026 vacancy is now forecast at 18%—10 basis points (bps) below our initial estimate. We also have lowered our new construction projections to 9.5 million sq. ft. from 11.2 million sq. ft., while our forecast for annual net absorption remains relatively unchanged at 37 million sq. ft.
- The prime vs non-prime vacancy gap is now the widest on record. As prime space fills and the construction pipeline remains constrained, demand is spilling to the next class of space. Ten of 14 major markets with prime vacancy below 15% have seen positive non-prime absorption over the past 12 months, most notably in downtown areas. Given this dynamic, we expect non-prime absorption to begin having a positive impact on the recovery of older urban buildings in markets such as Boston, Philadelphia and Washington, D.C., joining Manhattan, San Jose, San Francisco and Phoenix where nonprime absorption has already been strong.
Figure 3: U.S. Office Fundamentals
Key Updates to Forecast
- Leasing activity by AI-related companies has been particularly strong in the San Francisco Bay Area and Manhattan, which combined have accounted for 55% of all tech sector leasing to date in 2026. This reinforces our view that growth from this sector will be clustered in those dense hubs that house collaborative AI-resilient roles. Q1 2026 absorption in San Francisco nearly matched our initial forecast for the full year.
- In Chicago, we've revised our recovery timeline further out as softer job growth weighs on demand. On balance, our vacancy and net absorption forecast for 2026 remains largely consistent with our views six months ago.
- The relative strength of demand for the highest-quality space in H1 2026 surpassed our bullish expectations. This strong leverage at the top of the market, coupled with higher-than-expected inflation, has led to an upward adjustment to our overall rent growth outlook for 2026. We now expect to end the year at 2.7% year-over-year rent growth, up from prior projections of 1.5%. We continue to expect the highest-quality space to largely drive this rent growth.
- Downtown leasing activity has surpassed our initial expectations, up 24% year-over-year, with new leases representing a growing share of activity. We continue to expect the largest uptick in activity among large occupiers recommitting to urban footprints, which should help to lower downtown vacancy rates. While the overall downtown vacancy rate is currently 1.3 percentage points above the suburban rate, we expect that relationship to invert by mid-2027.
Contacts
Office
Realize potential in every dimension by leveraging the global leader in Office Services.
Related Insights
-
The attendance debate is over. The workplace investment debate is beginning. See what's driving the shift.
-
Article | Intelligent Investment
Business Insights | Hong Kong Hospitality: Momentum, Structural Shift & the New Lifestyle Era
August 6, 2026
The city's hotel market enters H2 2026 backed by record visitor volumes and a shrinking transient supply — a compelling story for investors and operators who can read the structural signals.
Insights in Your Inbox
Stay up to date on relevant trends and the latest research.