The office leasing market in the United States recorded notable gains in the third quarter of 2026. According to a recent market report by real estate services firm Newmark, nationwide leasing volume totalled 62 million square feet. This represents an increase of 18 per cent compared to the same period last year, although the figure remains 21 per cent below pre-pandemic quarterly averages. Newmark's survey tracks leasing transactions of 10,000 square feet and above across 62 US markets.
With the period from July to September, the US market recorded its sixth consecutive quarter of positive net absorption. Jessica Morin, Head of National Occupier Research at Newmark, pointed out that this momentum is taking place against the backdrop of a construction pipeline that has dropped to a 15-year low. In the leading gateway markets, the majority of pre-pandemic leases have now expired. According to estimates, around 42 per cent of these legacy leases remain in place nationwide, with the highest shares in Chicago at 53 per cent and New York City at 50 per cent.
Morin explained that occupiers were now reducing their space far more moderately than during earlier stages of the pandemic. While companies often reduced their portfolios by 30 to 40 per cent back then, space reductions now tend to range between 10 and 20 per cent. Looking ahead, the share of leases not yet adjusted to hybrid working models will decrease. As employers increasingly focus on high-quality working environments to retain staff, expiring legacy leases are leading to more upgrades into quality space in a competitive environment.
Falling vacancy rates and selectivity across building qualities
The continued stabilisation in space occupancy is also reflected in headline market metrics. The vacancy rate across all US markets decreased by 50 basis points to 19.8 per cent. While this remains at historically high levels, it represents a gradual improvement. At the same time, sublease availability fell by 21 per cent year on year. The recovery is uneven, however: while prime buildings in gateway markets and the Sun Belt capture the majority of demand, markets with negative net absorption such as Boston are also showing initial signs of recovery.
- —Year-to-date net absorption for Class A space reached 9.5 million square feet, outperforming trophy properties at 7.2 million square feet.
- —Space contractions across the Class B and C segments narrowed to 1.3 million square feet year to date.
- —Office space under construction stood at just 20.3 million square feet at quarter-end, the lowest level since 2012, with southern markets such as Dallas, Palm Beach and Miami leading development activity.
Real rental trends and persistently high concessions
While nominal prime rents rose across all asset classes, real rents adjusted for the GDP deflator remain 9.9 per cent below early 2020 levels. At the same time, average tenant concessions such as rent-free periods and tenant improvement allowances remain at elevated levels: according to Morin, they stood at $103 per square foot recently, after peaking at $107 per square foot at the start of the year. Morin stressed that the overall picture remains nuanced, as the divergence between top-tier trophy assets and secondary stock is expected to widen further.
