Office Rent Growth Accelerates as Gateway Market Rebound Continues

Executive Summary

• The U.S. office market posted its seventh consecutive quarter of positive absorption totaling 3.8 million sq. ft. in Q4. Annual absorption of 21 million sq. ft. was well below the long-run average.
• Leasing activity increased to 60.2 million sq. ft. in Q4, the second-highest quarterly total over the past three years, trailing only Q4 2024. Annual leasing activity totaling 225 million sq. ft. was just 3% below 2019 levels.
• Coastal gateway markets accounted for the majority of year-over-year leasing growth, led by Boston (+31%), San Francisco (+28%), Manhattan (+27%) and Philadelphia (+21%).
• Downtown districts accounted for 42% of Q4 leasing activity, despite comprising 35% of overall supply. Downtown leasing activity rose by 8% year-over-year in 2025, while suburban activity fell by 7% over the same period.
• The construction pipeline fell to 14 million sq. ft. in Q4 and full-year 2025 construction completions were at their lowest level since 2012. The rebalancing of supply and demand will continue to support the office market’s gradual recovery.
• Across the top 20 markets, prime vacancy was lower than the overall office vacancy rate by an average of 5.6 percentage points.
• Average asking rent rose by 1.9% year-over-year to $36.85 per sq. ft., the strongest annual growth since Q1 2020 and in line with the 30-year average.