Has Office Space Demand Turned the Corner

Office Market Recuperating: Early Signs of a Recovery ​

Office Market Shows Signs of Recovery​

• The national office vacancy rate declined from a record high 17.1% in 1Q 2024 to 16.7% in 4Q 2024​

• Office demand began to recover, with net absorption turning positive in 2Q 2024​

• Hybrid and work-from-home policies still present a challenge to the sector, but many high-profile companies are instituting return to office mandates​

Recovery Varies by Market and Property Class​

• The vacancy rate among primary market CBDs fell by 50 basis points since 1Q 2024, while the vacancy rate among secondary suburbs had only fell by 10 basis points​

• The class A vacancy rate dropped by 60 basis points, while class B/C rates fell by 30 basis points​

• Six metros — West Palm Beach, New Haven, Miami, Charleston, Las Vegas, and the Inland Empire — reported lower vacancy rates in 2024 than they did in 2019​

Shifting Office Market Creates New Investment Dynamics​

• Office cap rates have risen by 120 basis points since 2022, offering higher yields but likely greater risks​

• The combination of higher yields and recovering property performance may offer investors more opportunities in 2025​

Sources: Marcus & Millichap Research Services, CoStar Group, Inc. ​

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