2025 Mid-Year Office Market Report: Part One

SKIP AHEAD TO

• Gateway U.S. Office Markets: Key Findings
• Total Office-Using Employment Stable While Office Job Openings Yielded Slight Growth Over the Past Year
• Escalating Construction Costs Could Constrain Office Buildouts and Future Supply
• Average Monthly Days Worked from Home Stable YTD Compared to Year-End 2024
• Central Business District Vacancy Surge Reversed a Late 2024 Decline, and Still Outpaces Suburban Levels As Empty U.S. Office Space Reaches New High in First Half of 2025
• After 18 Straight Quarters of Decline, Office Sector Nears a New Normal in Its NCREIF Value Share

The office sector is showing signs of stabilization, but the recovery looks very different depending on market, asset class, and tenant type.

Check out our new Mid-Year Office Market Report, powered by CompStak data through Q2 2025. We’re highlighting critical shifts across 11 gateway markets including Boston, New York, San Francisco, Dallas–Fort Worth, and Washington, D.C.

Click here to download the full report here.

Gateway U.S. Office Markets: Key Findings

Office Employment Holds Steady While Openings Tick Up

Office-using employment was nearly flat year over year (+0.04%) but job openings rose 0.4%, signaling a cautious yet steady labor market.

Construction Cost Inflation Clouds the Buildout Pipeline

Rising input costs pushed the PPI for nonresidential construction goods to a three-year high, threatening to constrain new supply and tenant improvements.

Hybrid Work Nears an Equilibrium

Average work-from-home days have stabilized at ~27%, with summer 2025 usage hitting its lowest level since tracking began.

More Than Half of Gateway Submarkets Show Rent Growth Potential

More than half of gateway midmarkets show rent growth potential – 54.8% of markets had property market rent estimates above in-place rents, with Boston, Dallas–Fort Worth, and Chicago leading, while San Francisco, Brooklyn, and D.C. trailed.

Gateway Rent index Rebounds After Two Years of Decline

The gateway starting rent index rose 4.7% since Q1 2024, reaching a new high in Q2 2025 and signaling improving fundamentals.

Class A Lease Rollovers Loom Large Through 2030

More than half of all leases expire by 2030, with Class A expirations peaking in 2026 and rising further into 2029, potentially driving spillover demand into other segments.

Traditional Office Sectors Drive 
2025 Leasing

FIRE and legal tenants led activity, while TAMI showed recovery momentum and government/nonprofit leasing plunged following federal footprint reduction.

Tenant Incentives Diverge Sharply by Asset Class

Tenant incentives diverge sharply by asset class – free rent ratios held steady in Class A but surged in Class B, while work values plateaued at elevated levels in Prime Class A and climbed elsewhere.

Total Office-Using Employment Stable While Office Job Openings Yielded Slight Growth Over the Past Year

Over the past year, office-using employment has remained stable, increasing just 0.04% from 34.7 million in July 2024 to 34.73 million in July 2025. Job openings, however, have shown more movement, rising 0.4% from July 2024 to July 2025. In the past two quarters, openings have fluctuated within a narrow range, reflecting cautious but consistent hiring activity. Despite minor monthly shifts, both employment and job openings appear to be holding steady, indicating a labor market that has cooled from earlier highs but remains relatively healthy.

Escalating Construction Costs Could Constrain Office Buildouts and Future Supply

As of July 2025, the Producer Price Index for Net Inputs to Nonresidential Construction, Goods was at its highest level in three years. The index rose nearly 2.6% from July 2024, and has experienced a 2.4% increase in 2025 year to date. While less dramatic than the sharp price escalations seen in 2021–2022, the steady rise this year suggests persistent cost pressures in the construction sector. For the commercial office market, this translates into higher buildout and renovation costs, which could deter speculative development or tenant improvement projects. With construction budgets under pressure, the pipeline of new office space is likely to remain constrained, potentially supporting higher rents in established markets with demand for top-tier product.

Average Monthly Days Worked from Home Stable YTD Compared to Year-End 2024

Year to date, the data from Insights from WFH Research and the Survey of Working Arrangements and Attitudes has shown that the overall average of days worked from home so far was 27.7%, on par with last year’s end average of 27.6%. Despite this lack of movement in the YTD statistics, the average days worked from home over the summer months averaged 27.2%, which was the lowest average for June through August since this data has been tracked and down 130 basis points from last year.

Central Business District Vacancy Surge Reversed a Late 2024 Decline, and Still Outpaces Suburban Levels As Empty U.S. Office Space Reaches New High in First Half of 2025

U.S. office vacancy rates, according to the NCREIF Property Index, for both suburban and CBD, reached record highs in the first half of 2025. The CBD office rate had been trending downward at 2024-year end, a trend that reversed in the first half of 2025. The overall vacancy now stands at 19.7%, up considerably from a pre-pandemic low of 10.1% in late 2019, reflecting a prolonged shift in demand for office space. Central Business Districts (CBDs) have been hit the hardest with vacancy rates rising to 21.1%, surpassing suburban levels, which registered at 18.5% as of the second quarter. The reversal of the long-standing trend, where CBDs historically maintained tighter occupancy, underscores the lasting impact of hybrid work models and changing tenant preferences. Suburban markets, while also affected, have maintained a consistently lower rate compared to both national and CBD office markets since the pandemic, but continue to rise.

After 18 Straight Quarters of Decline, Office Sector Nears a New Normal in Its NCREIF Value Share

The office sector’s share of total market value in the NCREIF Property Index has fallen for 18 consecutive quarters since early 2021, reaching a record low of 19.6%. However, the pace of decline has slowed over the past two quarters, suggesting that institutional investors may view the sector as stabilizing—albeit at a new, lower baseline. Still, there is no indication that the office sector’s share will rebound to prior levels. In Q2 2020, when COVID-19 began, the share stood at 36.3%, more than 1,670 basis points higher than today.