U.S. office leasing hit a post-pandemic high in the fourth quarter of 2025, led by return-to-office momentum and large transactions that have surged as companies commit to long-term workplace strategies, according to a JLL Q4 report released Friday.
Almost all, or 97%, of Fortune 100 employees are subject to hybrid or full-time in-office requirements, leading to an average in-office attendance of four days a week and helping large-scale transactions rise about 15% year over year, the report says.
Shifting federal government attendance policies at the beginning of 2025 also have helped as public sector workplace policies align more closely with the private sector, “bringing a major uplift to daily office foot traffic in major federal government enclaves,” JLL said.
This normalization of attendance policies, in conjunction with aggressive post-pandemic rightsizing, has meant many major companies — JP Morgan and Amazon, among them — need expansion space, the firm says.
Annual leasing volume was up 5.2% year over year to 207 million square feet, with 55.1 million square feet in leasing transactions in Q4, a post-pandemic high, the report says.
Meanwhile, the supply of office space is hitting record lows with little relief in sight as inventory under construction dropped 20% below historic lows. Total vacancies at the end of the year sat at 22.2%.
Large markets are outperforming secondary markets, which are still working through post-pandemic recovery. Gateway markets grew 15% year over year, compared to 3.5% for secondary markets and 3.3% for tertiary markets.
“Consistent with leasing activity, the leading markets for occupancy 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 inventory 2.6%, followed by Silicon Valley at 1.3% and Phoenix at 1%.
In addition, market consolidation and more aggressive attendance policies are restoring the relationship between the physical location of talent and the companies’ workforces. That’s benefited gateway markets and major headquarter hub secondary markets like Dallas, Atlanta and Minneapolis.
Overall, steady demand recovery that has occurred over the past three years, combined with the slowdown in new supply, is beginning to lift more markets into “expansionary conditions,” JLL says. The firm noted that New York benefited from continued expansion by finance and professional services firms, while AI-oriented firms and startups helped the Bay Area.
The rise in activity and drop in supply is leading to premium rent surges, particularly in high-end properties.
“Leasing continues to be highly concentrated in newer assets, highly-amenitized Class A buildings and vibrant lifestyle market ecosystems,” JLL said. “Asking rents continue to show remarkable stability … [and] have largely stagnated for the overall market.”
The report supports research from CBRE, which found that the pricing gap between prime and non-prime office assets is expected to widen, creating demand in the next tier of space. “Prime assets will command premium pricing, while non-prime options offer room for creative deal structures and adaptive reuse strategies,” CBRE said in its report. “Renewals — especially for office and industrial space — will often have more tenant-favorable terms, including higher tenant-improvement allowances and more free rent.”
Asking rents declined 35 basis points year over year for the overall market, compared to the Class A segment that grew 68 basis points.
Looking ahead, leasing momentum is expected to remain positive in 2026, with a lack of meaningful downsizing or sublease additions and record-low construction predicted to boost absorption and keep rent growth stable.
“A persistent lack of new development and continued net reductions in overall inventory will continue to drive rent growth in high-end segments and drive more renewal activity for large occupiers,” the report said. “But if supply constraints become severe, occupiers may begin to pragmatically adopt more remote and flexible working arrangements, potentially undermining some of the progress of the leasing market recovery.”
