For the first time in at least 25 years, the amount of office space removed from the U.S. market will outpace new construction in 2025, according to CBRE Group. This significant shift is driven by a surge in office conversions and demolitions.
In the 58 largest U.S. markets, a substantial 23.3 million square feet of office space is slated for demolition or conversion into other uses. In stark contrast, developers are only projected to complete 12.7 million square feet of new office space in those same markets.
This net reduction in available office space, while described as “slight” by CBRE, is a potential silver lining for property owners. It’s expected to help reduce the stubbornly high office vacancy rate over the coming quarters. Office vacancies hit a record high post-pandemic and currently stand at 19%.
Despite the ongoing trend of remote work, there are early indicators of a potential rebound in office demand. Office net absorption has been positive for the past four consecutive quarters, following six quarters of decline. Furthermore, office-leasing activity jumped by 18% in the first quarter of this year compared to the same period last year.