CompStak’s 2024 Year-End Office Market Report: Part Two

SKIP AHEAD TO

• Most Suburban and Urban Markets Show Mixed Performance, but NYC Metro’s CBD and Urban Areas Stand Out With a Strong Class A and B/C Recovery at Year-End 2024
• Nearly One-Third of Gateway Market Leases Expire by 2027, with TAMI Tenants’ Share Rising in 2026–2027
• FIRE Sector Leads Leasing Activity for Third Consecutive Year but TAMI Sector Gained Ground
• Renewals’ Lease Term Length Showed Consistent Gains in 2024
• Prime Class A Effective Rents Climbed Steadily through 2024 in Sign of Potential Peaking, while Class A and B+ Also Improved
• The Share of Deals with Triple-Digit Rents Hit a New Peak in 2024, Rising Across Prime and Other Class A Buildings

The office market continues to evolve, shaped by shifting work habits, leasing activity, and economic forces. While office job losses slowed, remote work trends may be stabilizing, and TAMI tenants are showing signs of renewed leasing momentum. Prime Class A rents are nearing a potential peak, and landlords are adapting with record-high tenant incentives to secure long-term commitments. Meanwhile, NYC remained a hotspot for high-value legal leases.

In this blog series, we’ll break down the major insights from CompStak’s 2024 Year-End Report, diving into what these trends mean for the office market in the years ahead.

Want the full insights? Download a copy of the report here.

Most Suburban and Urban Markets Show Mixed Performance, but NYC Metro’s CBD and Urban Areas Stand Out With a Strong Class A and B/C Recovery at Year-End 2024

Market by market, CompStak analyzed effective rents to measure recovery levels across both building classes and suburban vs. CBD/urban submarkets. Using a combination of effective rent recovery since 2019 and year-over-year change (2023 vs. 2024), CompStak identified several key trends:

• Most markets are still showing mixed performance overall. For example, some markets may be experiencing a strong recovery in Class A space, but Class B/C performance remains weaker or still in decline.
  Overall, Class A is recovering better than B/C: there were 12 markets in strong or moderate recovery for A space across suburban vs. CBD/Urban as compared to 7 for Class B/C.
  
• Half of the analyzed markets (50%) had the same recovery performance across suburban and CBD/urban areas, including:
  Philadelphia/PA/DE/South NJ, where both CBD/urban and suburban are in recovery.
  San Francisco/Bay Area, where both CBD/urban and suburban remain weak.
  
• Three of ten markets exhibited complete opposite recovery trends between suburban and CBD/urban areas, including Phoenix, Atlanta, and NYC Metro.
  NYC Metro is the only market where the CBD/urban area is in recovery, while its suburban market lags.
• 
  Overall, suburban areas outperformed CBD/urban areas in recovery, with 9 markets/building classes in recovery compared to just 5 for CBD/urban.

Nearly One-Third of Gateway Market Leases Expire by 2027, with TAMI Tenants’ Share Rising in 2026–2027

Nearly one-third of all office leases across gateway markets are set to expire through 2027 according to CompStak’s data, with another 27.6% through the end of 2030. In contrast to the past several years, 2026 and 2027 represent an uptick in TAMI’s overall share of leases expiring, accounting for nearly 27% and 30% in 2026 and 2026, respectively. This rise in share of overall expirations for TAMI could mean a potential for increased activity from technology, advertising, and media tenants in the upcoming year.

FIRE Sector Leads Leasing Activity for Third Consecutive Year but TAMI Sector Gained Ground

In 2024, TAMI (Technology, Advertising, Media and Information) reached its highest share of gateway market leasing since 2021, though still below its 2016 pre-COVID peak. This rebound signals renewed momentum, with AI-driven demand steadily growing. The legal sector remained strong, securing a double-digit leasing share for the second year, while FIRE (Financial Services, Insurance, and Real Estate) led overall but has gradually lost dominance over the past two years.

Renewals’ Lease Term Length Showed Consistent Gains in 2024

Average lease terms for renewals increased notably throughout 2024, extending consistently for six consecutive quarters and surpassing Q4 2019 levels as of Q2 2024. This trend is a cautiously positive indicator for the office market, given that renewal terms had previously lagged in recovery following COVID-19. Improvements were broad-based across all building classes, with Prime Class A, other Class A, and especially Class B/C properties—which recorded the largest year-over-year increase of 25.5%—benefiting from extended commitments. In contrast, lease terms for new transactions, including expansions and relocations, remain slightly below (-2.5%) their Q4 2019 benchmark.

Prime Class A Effective Rents Climbed Steadily through 2024 in Sign of Potential Peaking, while Class A and B+ Also Improved

Since exceeding 4Q 2019 levels in 3Q 2021, Prime Class A rents have sustained double-digit growth, reaching a cycle high—potentially signaling a peak as top-tier space grows scarce. Meanwhile, early signs suggest demand may be broadening beyond just prime space. For instance, rents for the rest of Class A buildings ended 2024 up 19.1% from 4Q 2019. In contrast, Class B/C buildings overall continued to underperform, rising just 2.5% over the same period. However, this lag is not uniform across the segment—Class B+ rents have improved through 2024, while lower-tier Class B remains largely flat, and Class C rents are still below 2019 levels. These trends suggest that demand may be beginning to spill over beyond Prime Class A. Whether this shift continues into 2025 will depend on broader market conditions, especially as new construction remains limited.

The Share of Deals with Triple-Digit Rents Hit a New Peak in 2024, Rising Across Prime and Other Class A Buildings

In 2024, the share of deals with triple-digit effective rents climbed to a recent peak of 5.2%, driven by notable gains in the share in Prime Class A and Other Class A buildings—rising 97 and 48 basis points year over year, respectively. Meanwhile, Class B/C properties accounted for the lowest share of these high-rent deals.

The Share of Deals with Triple-Digit Rents Hit a New Peak in 2024, Rising Across Prime and Other Class A Buildings – Continued

Outside of New York City, the top ten buildings with the highest average effective rents for triple-digit deals were concentrated in the San Francisco Bay Area and Boston, largely fueled by key life science leases, as well as a newly constructed property in Dallas-Fort Worth. In New York City, Hudson Yards, Park Avenue, and the Plaza District led the rankings, driven by demand from financial tenants.