2026 Biannual Office Market Report: Part Four

The office market's recovery is real, but it is resting on a narrow base. Seven of ten gateway markets now rate as recovering in Class A, up from four a year ago, and AI tenants account for 51.1% of all TAMI leasing. Meanwhile, Class B/C has five markets in decline, and Prime Class A starting rents outside New York City and San Francisco sit below their Q4 2024 peak. Check out the full insights in the 2026 Biannual Office Market Report.

Subleases Are Still Paying Below Market, but the Spread Over Achieved Rents Narrowed to 9.6%

Subleases continue to clear below market rent, but by a shrinking margin. Market rent stood 18.4% above achieved sublease rents at the 2024 peak, the widest of the period, and held in a narrow 15.5% to 18.4% band across 2022 through 2024. That spread has since narrowed to 14.0% in 2025 and 9.6% through the first half of 2026, the tightest since 2021. Direct deals moved in the opposite direction. Market rent sat 4.2% below achieved direct rents in 2026, against 1.0% below in 2025 and a range of 0.0% to 2.6% below from 2020 through 2024. Sublease compression can reflect a shift in the mix of available space as readily as firmer pricing, so the direct spread carries the clearer signal on pricing momentum. Figures for 2026 reflect first-half transactions only.

Four Markets Face Meaningful Potential Upside at Renewal, While San Francisco Faces Repricing 9.0% Lower

Across gateway markets, just over a quarter of leased square footage, 27.4%, expires between 2026 and 2028, with another 29.8% running past 2034. Across that near-term block, repricing prospects split sharply by market. New York City carries the widest spread, with market starting rent 22.7% above current rent and 78.9% of expiring square footage positioned to reprice higher. Phoenix follows at 19.7%, and has the highest positive share of any market at 82.5%. Dallas-Fort Worth and Atlanta round out the upside group at 17.1% and 13.5%. The remaining markets cluster near flat. Washington, D.C., Chicago, and Boston all sit below 3.5%, with fewer than half of their expiring square feet positioned for an increase. San Francisco, however, stands alone on the downside, where market rent sits 9.0% below current rent, and only 30.8% of expiring space would reprice higher.

Five Markets Clear the Landlord-Favorable Threshold in Class A and Six in Class B/C

CompStak scored each market on four metrics: effective rent growth, lease term, concession ratio, and the spread of market rent over current rent for active leases. A metric counts when it favors the landlord, meaning rent, term, and spread rising or concessions falling. Each is tested against zero rather than ranked against other markets, so a market may rate as recovering elsewhere in this report while scoring no point here. Five of ten markets clear three of four in Class A, and six do in Class B/C. Phoenix leads Class A at four of four, and Washington, D.C. leads Class B/C. New York City is the only market at three or better in both. Class B/C scores higher here than in the recovery ranking, which measures effective rent alone, because lease term has lengthened in eight of ten Class B/C markets against three in Class A.

Class A Captured 88.6% of Triple-Digit Effective Rent Deals in 2026

Class A buildings accounted for 88.6% of leases signed at effective rents above $100 per square foot in 2026 through Q2, up from 85.6% in 2025 and above the 85.0% share posted in 2019. Prime Class A holds 56.9%, down from 59.9% in 2019, while the rest of Class A has risen to 31.7% from 25.1%. Seven of the eight top New York buildings for triple-digit deals are Prime Class A, including 66 Hudson Boulevard (Point72, TPG), 50 Hudson Yards (Jump Trading) and 245 Park Avenue (The Carlyle Group, Houlihan Lokey). Outside New York, San Francisco, the Bay Area and Los Angeles top the entire list, led by 600 Montgomery Street (Coatue Management, Mizuho Financial). Notably, only one Class B building clears the threshold: 1 Market Street, leased to Davis Polk and Simpson Thacher & Bartlett. Triple-digit pricing widening within Class A rather than below it keeps the flight to quality trend intact.

Check out the full insights in the 2026 Biannual Office Market Report.