May 30, 2025

Demand for Office Space Expected to Grow Amid Economic Uncertainty, Q2 2025

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q2 2025.

Key Takeaways:

• The national market for office space continued to rebound with a fourth consecutive quarter of positive net absorption. First-quarter absorption totaled 5.6 million square feet, which followed 7.3 million square feet absorbed in the fourth quarter of 2024.
• Rates of remote and hybrid work have plateaued, and the corresponding structural shift in office demand is already largely reflected in current leasing. Employers in several industries also appear to be requiring that employees spend more time at the office, resulting in a gradual increase in office use.
• Potentially disruptive changes to U.S. trade policy and growing concern about federal debt levels have dimmed the outlook for economic growth and increased the risk of a recession while simultaneously contributing to higher long-term interest rates. However, with unemployment and inflation both at low levels, a recession is not a foregone conclusion, and a mild recession would not be expected to have a major effect on net absorption of office space.
• Net office space absorption over the last three quarters of 2025 is expected to be 24.9 million square feet. Moving forward, the forecast projects that net absorption for 2026 will total approximately 15.1 million square feet. The current forecast is based on a conservative outlook for the economy that assumes a 70% chance of a mild recession.