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**Will 2026 Be the “Year of the Office”? Industry Leaders Say: It Depends**
The office sector has spent several years in flux, facing headwinds even before the COVID-19 pandemic forced mass remote work. However, since 2024, many analysts have identified a tentative turning point. In 2025, NAIOP predicted a year of stabilization and “small steps toward recovery.”
The 2026 outlook remains cautiously optimistic. While progress is ongoing, recovery across the U.S. remains uneven. “My office sector headline would be ‘a notable demand rebound in the third quarter finally halted a three-year decline in national occupancy,’” said Brian Connolly, Founder and CEO of Feasibly.
That said, structural uncertainties—ranging from labor trends to economic headwinds—are making a gradual and localized recovery more likely than a sweeping national rebound. “The market’s ongoing recovery is increasingly likely to be slow, uneven, and asset-specific,” added Gordon Lamphere, Vice President at Van Vissingen and Co.
### 2025 in Review: Office Sector Trends
Industry experts identified several key trends that shaped 2025:
#### Increased Return to Office (RTO)
Companies began mandating more in-person workdays as they embraced hybrid and flexible models. This trend helped improve demand for office space. Steve Quick, CEO of ISS North America, noted that the increased mandates reflected this acceptance and realignment.
Keith Reichert, Director of Research at Newmark, observed that office utilization varied significantly by geography. “Daily attendance continues to vary widely, with peak days reaching up to 70%, and some markets approaching 80% in areas with the strongest return-to-office momentum,” he said.
#### Reduction in New Construction
New construction tapered off significantly in 2025. Doug Ressler, Manager of Business Intelligence at Yardi Matrix, stated that new deliveries were at their lowest level in over a decade. “Projects currently in planning or under construction represent only 1.7% of national stock, down from 3.0% a year ago,” he said. A mere 25 million square feet were delivered in 2025—the lowest total since 2013.
#### Expanding Absorption and Decline in Vacancy
Positive net absorption became more common across major markets, especially involving Class A assets. Stefan Weiss, CBRE’s U.S. Head of Office Research, said that market strength was more visible in top-tier assets located in premium districts.
Despite overall vacancy rates remaining in the double digits, experts noted signs of reaching a plateau. “Vacancy is no longer on the rise, and we have finally reached somewhat of an equilibrium,” Lamphere confirmed.
#### Decrease in Sublease Space
After years of increased subleasing, availability started to drop in mid-2023 and continued into 2025.
#### Persistent Challenges
The post-pandemic bifurcation between high-quality and lower-tier office buildings continued. “The challenges existed for Class B or C buildings, as the demand was much less,” said Quick.
Ressler echoed this sentiment, stating, “Demand is still historically low, and physical occupancy has not increased in any meaningful way.” Employment growth in office-using sectors has stagnated, heightening fears of a future recession.
Weiss noted the ongoing “overhang of vacant space” that would take time to absorb or repurpose.
### Converting Office Spaces: Opportunity or Challenge?
Office-to-residential conversions surged in 2025, shifting from a concept to real execution. “Conversion activity finally shifted from theory to execution,” said Connolly. He added that 2025 marked the first time conversion and demolition activities exceeded new supply deliveries.
Peter Kolaczynski, Director of Data & Research at Yardi Matrix, said the U.S. office-to-residential pipeline reached 70,700 units, a 28% increase year over year. Conversions accounted for nearly 42% of all adaptive reuse projects.
However, conversions aren’t a silver bullet due to high costs, zoning hurdles, and physical limitations of existing buildings. “Many office buildings simply do not convert well due to floor-plate depth, window access, or structural layouts,” Lamphere explained.
Successful conversion projects typically involve either large-scale rezonings or deep property discounts that justify redevelopment costs.
### 2026 Crystal Ball: What to Expect
#### Distress, But No Collapse
Though fears of widespread foreclosures were mostly avoided due to loan extensions and modifications, Connolly warned that distress levels reached their worst point since the Global Financial Crisis. “CMBS delinquency rates for office assets spiked to a record of nearly 12% in late 2025,” he noted.
The debt maturity wall looms ahead, with refinancing challenges expected to grow as elevated interest rates and hybrid work remain entrenched. “Nearly half of the leases signed before 2020 have yet to hit their expiration and rollover point,” Connolly added.
#### Geography Dictates Recovery Pace
Not all office markets are equal. Kolaczynski pointed out that “North American office markets are in different stages of recovery.” New York City is seeing significant leasing activity, while West Coast cities—Los Angeles, San Francisco, San Diego, and Seattle—remain sluggish.
Reichert and Weiss observed that Manhattan and other coastal markets were staging a comeback. “The recovery that began in prime product and prime corridors has now expanded into the commodity space market,” Weiss said.
#### Moderate Growth for Premium Assets
Expectations for rent growth remain modest. “We expect asking rents to remain fairly stable next year,” said Reichert. Effective rents may shrink slightly, especially in gateway cities, due to continued concessions.
Weiss and Connolly agreed that trophy assets would retain pricing power. “Trophy assets can still command record rents,” Connolly remarked.
Kolaczynski said tenants are willing to accept higher costs in exchange for better spaces. “Landlords in top-tier assets will benefit from increased demand and reduced need for concessions,” he said. Quick affirmed that companies would continue to right-size their portfolios in pursuit of quality.
### Trends to Watch: Tech, Amenities, and Workforce Alignment
Weiss noted that labor market conditions in 2026 will play a key role. If job growth is steady, that will help rebalance office market fundamentals.
Artificial intelligence and flexible working are also reshaping demand. “The massive influx of venture capital into AI will cultivate a new class of innovative tenants that prioritize collaborative, urban environments,” said Connolly.
Ressler observed an uptick in demand for flexible space solutions as companies seek alternatives to traditional leases.
Occupier preferences are also evolving. Office users increasingly prioritize high-end amenities such as wellness centers, curated dining options, rooftop terraces, and tech-enabled collaboration spaces.
“This shift is redefining what ‘premium’ means in office real estate,” said Kolaczynski. Connolly added that these amenities “support higher occupancies and pricing power.”
Finally, CBRE’s Weiss noted a resurgence in demand for urban core locations after years of suburban migration. “We’re also seeing renewed conviction on the part of occupiers to make long-term capital commitments to downtown hubs,” he said. “That’s a trend we expect to continue in 2026.”
In conclusion, whether 2026 becomes the “Year of the Office” will depend largely on geography, building quality, economic resilience, and adaptability. While clear signs of improvement exist, the office market’s path forward is likely to be nuanced, segmented, and slowly evolving.
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