Demand for offices rises in the US amid shortage of new space — CNBC
The US office real estate market recorded its fifth consecutive quarter of positive net absorption: in the third quarter, tenants added 6 million square feet of office space. At the same time, the supply of new premises is shrinking faster than demand is recovering, CNBC reports, citing a JLL report.
Fewer new offices
Only 3.5 million square feet of new office space was brought to market in the third quarter, matching the near-record low level of the previous quarter. At the same time, 9.6 million square feet of offices was removed from the inventory through conversion or redevelopment. Since the end of 2023, the country’s total office inventory has decreased by 45 million square feet.
Only 23 million square feet of office space is currently under construction in the United States. The supply of top-tier offices is particularly limited: JLL called this trend a “flight to scarcity.” Rental rates have begun to rise amid the shortage of such premises.
Rents are rising
Effective rental rates for first-generation top-tier office space exceeded the third-quarter 2025 level by more than 20%. The shortage of such premises is forcing some tenants to move to second-generation offices, where rates rose by 10% over the year.
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Employers are also expanding their leased space: newly signed agreements provide for an average 13% increase in occupied space. Two years ago, the office market was dominated by a trend toward reducing space.
Demand across different cities
The technology sector accounted for the highest net absorption of office space in San Francisco and Austin. Sun Belt markets also saw strong demand, while smaller markets recovered to about 95% of 2019 leasing volumes.
Walker & Dunlop CEO Willy Walker noted that office construction volumes this year amount to about 9% of the usual annual level. According to him, a lack of investment capital is holding back the launch of new projects despite shrinking supply and rising demand.
