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U.S. office leasing hit a post-pandemic peak in the fourth quarter of 2025, led by back-to-office momentum and large transactions that have picked up as companies commit to long-term employment strategies, according to a JLL Q4 report. premiered on Friday.
Nearly all, or 97 percent, of Fortune 100 employees are subject to hybrid or full-time office requirements, resulting in an average office attendance of four days a week and helping large-scale transactions grow by about 15 percent year over year, the report says.
The change in federal government assistance policies in early 2025 has also helped to align public sector workplace policies more closely with the private sector, “resulting in a large increase in daily office foot traffic in key federal government enclaves,” JLL said.
This normalization of support policies, along with aggressive post-pandemic downsizing, has left many major companies — JP Morgan and Amazon among them — in need of room to expand, the firm says.
Annual leasing volume rose 5.2% year over year to 207 million square feet, with 55.1 million square feet in leasing transactions in the fourth quarter, a post-pandemic high, the report said.
Meanwhile, office supply is hitting record lows with little relief in sight as inventory under construction fell 20% below record lows. The total number of vacancies at the end of the year was 22.2%.
Major markets are outperforming secondary markets, which are still working through the post-pandemic recovery. Gateway markets grew 15% year-on-year, compared to 3.5% for secondary markets and 3.3% for tertiary markets.
“Consistent with leasing activity, the top markets for employment gains in 2025 were dominated by coastal gateways and mid-sized Sun Belt secondary cities,” JLL said. New York and the San Francisco Peninsula increased inventories by 2.6%, followed by Silicon Valley with 1.3% and Phoenix with 1%.
In addition, market consolidation and more aggressive attendance policies are restoring the relationship between the physical location of talent and the workforce of companies. This has benefited gateway markets and major secondary downtown markets such as Dallas, Atlanta and Minneapolis.
Overall, the steady recovery in demand that has taken place over the past three years, combined with the slowdown in new supply, is starting to lift more markets to “expansion conditions”, says JLL. The firm noted that New York benefited from the continued expansion of financial and professional services firms, while AI-oriented companies and startups helped the Bay Area.
Increased activity and falling supply is driving premium rent increases, particularly in high-end properties.
“Leasing remains concentrated in newer assets, highly appointed Class A buildings and vibrant lifestyle market ecosystems,” JLL said. “Ask rents continue to show remarkable stability… [and] have largely stagnated for the overall market.”
The report supports CBRE researchwhich found that the price gap between prime and non-prime office assets is expected to widen, creating demand for the next tier of space. “Prime assets will be priced at a premium, while non-prime options provide room for creative deal structures and adaptive repurposing strategies,” CBRE said in its report. “Renovations, especially for office and industrial space, will often have more favorable terms for tenants, including tenant improvement bonuses and more free rent.”
Asking rentals declined 35 basis points year over year for the global market, compared to the Class A segment which grew 68 basis points.
Looking ahead, leasing momentum is expected to remain positive in 2026, with a lack of significant subletting reductions or additions and record low construction expected to increase absorption and keep rental growth stable.
“The persistent lack of new development and continued net reductions in overall inventory will continue to drive rental growth in the high-end segments and drive more renovation activity for large occupiers,” the report said. “But if supply constraints become severe, occupiers may begin to pragmatically adopt more remote and flexible work arrangements, which could undermine some of the progress of the rental market recovery.”
