Despite the economic uncertainty, the office demand in the US went on to remain resilient in the first quarter of 2025 by showing negative absorption within the period but also increasing by 30% quarter-over-quarter and 48% year-on-year when it came to a four-quarter rolling total, confirmed the Q1 2025 Office MarketBeat report by Cushman & Wakefield that was released on April 14, 2025.
It is well to be noted that the net absorption remained positive in the first quarter of 2025 for a third of the US markets, with more than half of the office buildings either having just a single-digit vacancy or no vacancy at all.
Interestingly, the amount of vacancy that is coming from the occupiers putting space on the sublease market has also dipped for four straight quarters, thereby helping the absorption with an outcome of national sublease availability declining 9.5% year over year. Simultaneously, the activity in terms of construction goes on to dwindle, with the deliveries eyeing their lowest quarterly total in over 12 years.
The sublease market happens to be the precursor of the total vacancy, so in a way, it is an indicator that the demand side of the equation is indeed firming up.
Furthermore, the national vacancies finished their quarter at almost 21%, which is up 25 basis points, quarter over quarter. Though the figure is still moving upwards, the vacancy pace is kind of slowing, according to Cushman & Wakefield.
In totality, the vacancy happens to remain flat or decline quarter to quarter across 30 US markets, which include counties like Miami, San Jose, Fairfield, Connecticut, San Diego, Central New Jersey, Atlanta, etc.
The transition when it comes to economic policies like tariffs on materials and products that are important to facilities management has, as a matter of fact, not had a considerable effect on office demand in the US. However, the fact is that the longer the uncertainty in policy lasts, the more damaging it is going to be, says Cushman & Wakefield.
The firm says that they are already witnessing signs when it comes to weaknesses that are emerging across the economic data, thereby further noting that claims go on to remain low but are in a way drifting high; the layoff announcements did see a spike in March, and CFO optimism is dipping down. All these factors can lead to apprehension when it comes to long-term investments, such as leases, says the report.
In spite of this kind of uncertainty, new construction, which is limited, declines in the sublease availability. And workforce downsizing because of remote work had been frontloaded in the past five years; all these reasons point to being cautious and optimistic, confirms Cushman & Wakefield.
But recovery is not going to be distributed equally. There would be some markets that would experience record high vacancy but would still be witnessing a limited amount of top-tier space that’s available. Cushman & Wakefield say that it is significant to focus on every asset’s competitive trait and not the overall market, which may as well include buildings that might be perfectly functional but competitively old.
