Office Market Stabilizes Amid Rising Demand, Limited New Supply
Source: CBRE Research, Q1 2026.
Net Absorption Remains Positive, Signaling Steady Demand Growth
Net absorption totaling 6.9 million sq. ft. was the highest Q1 total since 2020 and marked the eighth consecutive quarter of positive demand. Trailing-four-quarter net absorption totaled 27.8 million sq. ft.
Leasing Activity Nears 2019 Levels
Q1 leasing activity totaling 56.2 million sq. ft. was up by 0.2% from a year ago. Activity over the past eight quarters averaged 58.6 million sq. ft., 11% above the previous eight-quarter average. CBRE estimates that annual leasing activity this year will surpass 2019 levels.
Overall Vacancy Stabilizes While Prime Vacancy Tightens
The overall office vacancy rate fell by 10 basis points (bps) to 18.6%, while the prime vacancy rate fell by 80 bps to 12.7%. Midtown Manhattan’s prime vacancy rate fell to just 2.9%.
Construction Pipeline Remains Relatively Low
While the under-construction pipeline ticked up slightly in Q1 to 15.8 million sq. ft., it was down by 87% from the peak in Q2 2020. The slight uptick in Q1 was primarily due to a large new construction start in Midtown Manhattan. Construction completions totaling 1.3 million sq. ft. were the lowest quarterly total since CBRE began tracking this metric in 1990.
Taking Rents Grow Faster Than Asking Rents
Average asking rent increased by 2.2% year-over-year in Q1 to $37.21, the fastest pace in six years and above the trailing-30-year average. Taking rents rose by 2.7% to $33.35. The spread between the two fell to 10.4% but was notably above their 8.6% spread in 2019.
Office Investment Volume Continues to Rise
Total office investment volume is expected to increase by 20% in 2026, continuing the market recovery. Both private and institutional investors have increased their office holdings since 2023. Loan-to-value ratios for permanent office loans rose to 61.4% in Q1 2026 from 58.4% in Q4 2025, reflecting improving lender appetite for high-quality assets.
Top Markets by Overall Inventory – Vacancy and Leasing
Source: CBRE Research, Q1 2026.
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