U.S. Office Market Dynamics, Q4 2024

The culmination of 2024 marked another key development in the recovery of the U.S. office market—as leasing activity has accelerated over the course of the year, Q4 was the first quarter of positive net absorption since Q4 2021, and just the second quarter of occupancy gain since the onset of the pandemic in 2020. Leasing activity has established post-pandemic highs for the past three consecutive quarters, and Q4 volume reflected more than 92% of pre-pandemic averages. With many companies establishing regular office attendance requirements in recent years, downsizing rates have fallen significantly, allowing emerging organic demand growth to drive gains for the overall market. Rental rates continue to trend upwards on average, and landlords saw some moderation of concessions rates that have grown significantly in recent years. They will see further relief over the medium term as the development pipeline has declined dramatically from 2019 levels, and underperforming inventory is rapidly being removed from the market for conversions and redevelopments.