After several years of uncertainty, the U.S. office market is showing strong signs of recovery. Leasing activity across the nation has picked up, and in some cases, it’s reaching levels not seen since before the pandemic. With more tenants touring buildings and new office leases being signed in volume, a cautiously optimistic narrative is beginning to take hold among major landlords and investors.

Momentum Returns to the Office Market

Piedmont Office Realty Trust, one of the nation’s largest landlords, recently reported over 850,000 square feet leased so far in 2025, more than half of which has been signed just since Q2 began.[i] Notably, 70% of that represents brand-new office leases in previously vacant space. That kind of activity is significant in a landscape still shaped by economic turbulence and changing workplace trends.

This is indicative of a broader industry trend: tenants are returning, and they’re prioritizing high-end, well-located properties. In fact, according to CoStar, new office leases in Q1 2025 nearly matched 2019 volumes. Building security firm Kastle Systems further supports this shift, reporting that the top office buildings are reaching over 90% of their pre-pandemic occupancy levels on peak days.[ii]

The message is clear: for the right type of property, demand is building fast.

Premium is the New Normal

While nationwide vacancy rates remain elevated, averaging 19.7% as of April 2025[iii], not all office spaces are created equal. Modern, amenity-rich Class A buildings are outperforming older spaces by a wide margin. Vacancy for high-end buildings is closer to 13%, while the rest of the market hovers around 19% or more.

This bifurcation is driving a wave of repositioning and reinvestment. Global developer Tishman Speyer recently made its first New York office acquisition since 2019, investing $106 million in a fully leased SoHo property to “capitalize on the strengthening New York City office leasing environment.”[iv] BXP and Cousins Properties are also doubling down, either upgrading existing portfolios or breaking ground on new construction, even in supply-constrained markets like D.C.[v]

Nationwide Perspective

Despite high vacancy rates, rents are rising. In April 2025, the average U.S. office listing rate hit $33.34 per square foot, a 5.4% increase from the prior year. Manhattan and San Francisco continue to command the highest rents ($68.34 and $64.19, respectively), while cities like Miami, Houston, and Minneapolis are seeing stronger-than-expected leasing demand.

Though overall lease volumes remain below pre-2020 levels and average lease sizes are about 15% smaller, the consistent improvement in leasing activity, and a notable drop in sublease availability over three consecutive quarters, suggest that market stabilization is well underway.

Why This Matters for Investors

This national uptick in office leases aligns with what we’re seeing locally. Interest in our office portfolios has grown significantly in recent months. Prospective tenants are engaging more frequently and more seriously: a promising trend that mirrors the national data.

At Larson Capital Management, we believe these tailwinds are meaningful. We’ve built our strategy around resilience, opportunity, and smart growth, and the current shift in the office market reinforces why.

With limited new supply, growing tenant interest, and modern buildings commanding a premium, we believe this is a moment for forward-thinking investors to position themselves for long-term success. Our portfolios are designed to capitalize on trends like these: curated, hands-on, and built to empower your future. Now is the time to revisit your allocation and connect with our team about the next wave of opportunity in office real estate.

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[i] https://www.costar.com/article/2114598526/nations-largest-office-landlords-say-leasing-is-hitting-post-pandemic-highs

[ii] https://www.costar.com/article/21757472/is-it-2019-again-for-these-top-tier-office-towers-in-major-cities-its-starting-to-feel-like-it

[iii] https://www.commercialedge.com/blog/national-office-report/

[iv] https://www.globest.com/2025/06/04/tishman-speyer-snatches-first-manhattan-office-property-buy-in-6-years-at-discount/

[v] https://www.costar.com/article/1312179309/demand-for-top-tier-office-space-pushes-bxp-leasing-back-to-pre-pandemic-levels