2026 Biannual Office Market Report: Part One

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.

KEY FINDINGS

Office Job Openings Keep Falling Even as AI Mentions in Postings More Than Triple: Office-using job openings were down 8.8% year over year in July 2026, while AI mentions in Indeed postings more than tripled to 6.3% since 2020.

Construction Costs Near Record High, Office Spending Near Record Low: PPI for nonresidential construction rose 7.6% year over year in July 2026, while office construction spending excluding data centers fell 10.9%, to near a dataset low.

Seven of Ten Gateway Markets Now Recovering in Class A, While Class B/C Slips: Seven of ten markets now rate as recovering in Class A, up from four a year ago. Class B/C moved the other way, with five markets in decline against three.

Concessions Drop Three Quarters Running, Nearing 2019 Levels: The new lease concessions ratio returned to its 2019 average of 16.5% after peaking at 19.9% in 2023, with renewals falling alongside it for the first time since 2019.

AI Tenants Drive the TAMI Recovery, Taking More Than Half of All Leasing in the Sector: AI tenants took 51.1% of TAMI leasing activity in 2026, up from 20.2% in 2025, lifting total TAMI leasing to 26.6%, above its 26.0% peak in 2021.

More Than a Quarter of Leased Space Expires by 2028, With Repricing Split by Market: Just over a quarter of leased square footage, 27.4%, expires between 2026 and 2028. Market rent runs 22.7% above current rent in New York City and 9.0% below in San Francisco.

Office Job Openings Still Trending Down, Signaling Employment's Recent Slowdown As Sector Headwind

Office-using job openings peaked at 3.2 million in March 2022, up 60.8% year over year, seven months before office-using employment peaked at 35.0 million in November 2022. Year-over-year job openings turned negative in August 2022, 13 months before year-over-year employment growth followed in September 2023, and the decline ran far steeper, bottoming at -38.3% in July 2023. Meanwhile, employment troughed far shallower at -1.0% year over year one year later in June 2024. Changes in job openings lead office-using employment, moving first and with greater amplitude.

Openings have yet to show positive growth. Year-over-year change in job openings has stayed negative in 10 of the last 12 months through July 2026, most recently -8.8%, even as change in office-using employment in the same period is relatively flat at -0.2%, its mildest decline in the last 12 months. The absence of a sustained positive read in openings suggests employment's recent moderation may prove temporary, a headwind for office leasing demand.

AI Job Postings Triple as Software Development Hiring Diverges Sharply From the Broader Labor Market

AI mentions in Indeed job postings surged from 1.9% in February 2020 to 6.3% by July 2026, more than tripling, with the pace accelerating sharply since September 2024, when it was 2.4%. This signals AI has moved from a niche skill to a mainstream hiring consideration in under two years on Indeed's platform.

The trend in software development postings is diverging sharply from the broader labor market. Both fell together in the pandemic, but software development then outperformed, peaking at an indexed value of 233.84 in February 2022 versus 161.15 for overall postings. However, the reversal has been severe: software development postings bottomed at 61.12 in May 2025, below the pandemic trough, before recovering to 75.45 by July 2026, though still 24.6% below baseline. Overall postings, by contrast, sit near baseline at 102.1. Notably, this divergence tracks with AI's rise in Indeed job postings, suggesting AI-driven productivity gains may be suppressing software development hiring specifically.

Professional Services AI Adoption Hits New High as TAMI and FIRE Pull Back From August Peaks

According to US Census survey of businesses that asks if the business currently uses or plans to use AI in the near future, the rates for TAMI, FIRE, and Professional Services businesses all trended higher between November 2025 and September 2026, though their most recent moves diverge. The Information sector, a TAMI proxy, peaked at 46.0% in late August before easing to 43.5% by September 6, after touching a low of 30.3% in March. Finance and Insurance, our FIRE proxy, followed a similar pattern, up to 40.0% in late August, then back to 36.5%. Professional Services, however, kept climbing, reaching a new high of 43.3%, its strongest reading of the period. Expected six-month adoption remains above current use across all three sectors, with the gap widest for Finance and Insurance at 7.3 percentage points, pointing to FIRE as the segment most likely to accelerate AI-driven space demand next.

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