December 12, 2024

Demand for Office Space Expected to Stabilize

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q4 2024.

• After five straight quarters of negative net absorption, the U.S. office market turned a corner with 1.0 million square feet of positive net absorption in the second quarter of 2024 and 4.9 million in the third quarter, according to historical data provided by CoStar.
• The risk of a recession appears to have diminished, and it is possible that the recent positive absorption is the result of a structural improvement in demand that will persist over the next two years.
• Net office space absorption in the fourth quarter of 2024 is expected to be 9.4 million square feet, with another 10.8 million square feet of positive absorption for the full year in 2025 and 3.9 million square feet of positive absorption in the first three quarters of 2026.
• Uncertainty about the effects of future federal policy on the economy and government leasing activity presents a potential risk to continued demand growth.
• If the construction of new office space continues to outpace demand in 2025, the average vacancy rate will continue to rise.