National Office Market Expected to Absorb 10M SF Through 2026: CoStar

The national office market is on track for 10 million square feet of absorption in 2026, momentum driven primarily by return-to-office trends in defiance of stagnating job numbers.

Data from CoStar indicates that Class B and C offices in New York City in particular will start to populate in 2026 as demand for office space makes a fuller post-pandemic recovery, especially with most Class A inventory spoken for in Manhattan, according to Phil Mobley, national director of U.S. office analytics at the business intelligence firm.

“There is still momentum in the return-to-office movement, and that means there are space needs for existing employees who are moving from remote to in-office work,” Mobley told Commercial Observer. “That’s not unrelated to the second major thing, which is that we have an unusual variability in performance within the office sector across major cities.”

While New York City has about 10 percent of the nation’s office stock, Dallas and Charlotte are also major factors in the absorption CoStar is predicting over the next five quarters, as the financial services industry continues to grow in those markets.

The financial industry is also one of the few sectors adding jobs at a time when information, tech and media companies have been cutting payroll.

“I think those two dynamics are driving performance and led to really strong absorption in the third quarter. We expect that to continue in the near or medium term, ” Mobley said. “Of course, that has a ceiling to it.”

In the third quarter, CoStar recorded tenants taking occupancy of about 12 million more square feet than they vacated across national market, marking the first time that kind of momentum has been seen since 2019 apart from leasing spurts that happened in 2021 and 2022, according to Mobley.

“It’s not just the headline number, it’s also the kinds of buildings that saw occupancy gains or at least a stopping of the occupancy losses,” Mobley said. “For example, buildings that are at least 10 years old had essentially been bleeding occupancy even back into 2019, but in Q3 they saw occupancy gains.”

In the first half of 2025, New York City employers added fewer than 1,000 jobs, which marked the slowest period outside of a recession or the pandemic since 2003, according to The New York Times.

This was followed by the news last week that Amazon is eliminating 14,000 jobs from its payroll, among major job losses from other major employers. None of this, however, fazed major New York City landlord Empire State Realty Trust in its third-quarter earnings report.

Mark Hallum can be reached at mhallum@commercialobserver.com.