Here’s a forward-looking view of the U.S. office market for Q4 2025, based on current data and likely trajectories. The picture is mixed: modest stabilization in certain submarkets, but continued structural headwinds and bifurcation between “winners” and “losers.”
Macroeconomic & demand backdrop
To frame the office outlook, we first need to layer in macroeconomics and occupier behavior:
- Economic growth is expected to remain soft but positive. S&P forecasts ~1.5% real GDP growth in 2025, reflecting a modest slowdown relative to 2024.
- Office-using employment (professional, business services, finance, information) is recovering slowly but unevenly; in many metros, growth is constrained by cost pressures, AI/automation, and capital investment caution.
- Hybrid work is largely entrenched. Many firms have settled on partial in-office mandates, but utilization remains below pre-pandemic norms in many markets.
- The pipeline of new office supply is constrained by cost, zoning, and risk aversion. Many markets are seeing more space removed (via conversions or demolitions) than new deliveries.
These forces suggest that Q4 will be a test of whether demand can broadly outpace supply shrinkage—and whether capital markets continue to support repositioning, repurposing, and high-quality product.
Key trends shaping Q4 2025
Here are several themes likely to define how the national office sector performs in Q4:
- Further bifurcation: flight to quality intensifies
- High-quality trophy and well-amenitized Class A buildings, especially in core submarkets with transit connectivity, are likely to remain outperformers. Tenants will continue migrating from outdated, inefficient stock to newer, tech-enabled, ESG-friendly properties.
- For lower-tier, functionally obsolete, or poorly located assets, vacancy and stress will remain high. These may become conversion candidates or face distressed exit.
- The “flight to quality” is already evident: Cushman & Wakefield notes that in Q2 2025, Class A absorption was positive in over half of U.S. markets.
- Net absorption likely modest, perhaps flat to mildly positive
- In Q2 2025, net absorption nationally was still slightly negative (~ –2 million SF), but the pace of losses was improving compared to earlier quarters.
- Active tenant requirements (i.e., real searches) rose ~5.8% QoQ in Q2, hinting that occupier demand is stirring.
- Many occupiers are renewing rather than expanding or relocating, so the growth in new leasing may be constrained.
- Given economic uncertainty and capital constraints, some firms may delay decisions. Thus, Q4 could see absorption that’s barely positive or flat in many markets.
- Availability and vacancy pressures persist, but supply removal softens the blow
- National availability (direct + sublease) is high. In Q2 2025, availability was ~23.2% (20% direct + 3.2% sublease) per Avison Young.
- However, inventory losses from conversions/demolitions are dragging down effective supply. In Q2, U.S. inventory declined ~700,000 SF, as removal of obsolete space outpaced new deliveries.
- CBRE expects 2025 deliveries to land at a 13-year low (~13 million SF), constraining the upside supply risk.
- Still, in markets with elevated construction pipelines (esp. Sun Belt), new supply may contribute to softness unless absorption picks up.
- Overall, vacancy may inch upward or stay flat in many metros, unless strong demand emerges in Q4.
- Rents and concessions: soft upward pressure, but limited upside
- Asking rents at the national level have been relatively stable or slightly up. According to CommercialCafe, the national average full-service equivalent listing rate was ~$32.63/sf in August 2025 (slightly down –0.4% YoY).
- In many markets, concessions (free rent, TI allowances, flexible lease terms) remain substantial, which dampens effective rent gains.
- In top-tier submarkets, landlords may attempt modest rent hikes or tighter concessions, especially if occupancy trends improve.
- But across most markets, upward pressure will be muted unless absorption accelerates meaningfully.
- Capital markets, valuations & distress risk remain front-of-mind
- Many office valuations have already declined 30–50% from pre-pandemic peaks. Some markets may see further markdowns in Q4.
- Lending remains cautious. Banks and debt providers are closely scrutinizing underwriting, especially for assets with uncertain cash flow.
- Assets with thin coverage, short leases, or high capex needs may come under distress pressure or be forced into recapitalizations, note sales, or conversion.
- On the positive side, if macro stability holds and capital markets remain open, repositioning and retrofitting plays may attract capital, especially in strong core locations.
- Conversion, redevelopment & obsolescence accelerates
- A structural trend: more office space is being removed (through repurposing or demolition) than delivered in many markets.
- In many cases, conversion to residential, life sciences, labs, or mixed use is the most viable path for underused assets.
- Q4 may see such conversions accelerate, particularly in gateway metros with favorable zoning and high residential demand.
Market-by-market variation & caveats
While the above trends provide a national lens, outcomes in Q4 will diverge significantly across metros:
- Gateway & tech centers (NYC, San Francisco, Boston): likely to see better performance in prime submarkets. Vacancy may compress in trophy office cores if demand holds.
- Sun Belt & secondary markets: Some may still have headwinds from overbuilding, but lower cost and corporate migration trends could provide tailwinds.
- Rust Belt / low-growth metros: Likely to remain under stress; weaker demand, weaker job growth, and fewer conversion options will constrain recovery.
- Markets with high sublease overhang or large corporate downsizing risk may see downward pressure on rents and vacancy.
Another caveat: macro surprises. A deeper economic slowdown, credit stress, or regulatory changes could strain demand further. Conversely, a positive upside surprise (e.g. tech hiring rebound) could boost absorption beyond expectations.
Q4 2025 Outlook: Summary & implications
- Net absorption: Likely modest positive or flat in many markets; core top-markets may outperform.
- Vacancy / availability: In many metros, vacancy may inch up or hold steady; supply removal will cushion the downside.
- Rents: Asking rents may inch upward in strong submarkets; effective rents will remain under pressure from concessions.
- Valuation & finance: Continued caution; further mark-downs and distress risk in underperforming assets; capital will favor high quality.
- Strategic plays: Conversion, repositioning, amenity upgrades, ESG retrofits, and focus on prime submarkets will continue to be key differentiators.
