The U.S. office market is rebounding faster than anticipated, with the latest report from JLL indicating a fifth consecutive quarter of positive net absorption, where occupiers added 6 million square feet in the third quarter of this year. This recovery is marked by a notable increase in signed leases, which now average a 13% increase in footprint compared to previous years.
However, the supply of new office space is dwindling, with only 3.5 million square feet delivered in the third quarter, matching a near-record low. Additionally, 9.6 million square feet were removed from inventory due to conversions or redevelopments, resulting in a total loss of 45 million square feet since the end of 2023.
Currently, only 23 million square feet of new office space is under construction, leading to what JLL describes as a 'flight to scarcity.' This scarcity is driving up effective rents for first-generation trophy spaces by over 20% compared to the same period in 2025, while rents for second-generation spaces have increased by 10% annually.
Willy Walker, CEO of Walker & Dunlop, highlighted that those who invested in office properties in major markets like San Francisco and New York over the past two years have seen substantial gains. Despite the strong demand, particularly from tech companies and in Sun Belt markets, construction activity remains low, at only 9% of normal annual supply.
The lack of equity capital is hindering new projects, suggesting that the market will remain supply-constrained, further pushing rents upward in the coming years