Office Demand Rebounds to Highest Level Since Covid Pandemic Began

Why It Matters

The rebound signals renewed confidence in office leasing, reshaping investment strategies and highlighting the importance of location‑specific growth drivers in a post‑pandemic commercial real estate landscape.

Key Takeaways

• VTS Office Demand Index up 18% QoQ, 13% YoY
• Vacancy rate fell to 22.2%, lowest since Q2 2025
• San Francisco and NYC lead demand; AI and finance drive growth
• Los Angeles sees double‑digit demand rise from creative sector
• Boston, Seattle, DC, Chicago face demand contraction amid weak employment

Pulse Analysis

The VTS Office Demand Index recorded its strongest quarter since the COVID‑19 pandemic, climbing 18 % from Q4 2025 and 13 % year‑over‑year. The surge reflects a wave of new in‑person and virtual tours, a leading indicator of lease activity that typically materializes a year later. Despite a 2 % dip in office‑using employment since 2022, employers appear to be leveraging tighter labor markets to bring staff back to physical workspaces. This rebound unfolds against geopolitical tension with Iran and lingering U.S. economic uncertainty, underscoring the resilience of commercial real estate demand.

Demand is far from uniform. San Francisco and New York City dominate the recovery, buoyed by rapid AI‑driven hiring in tech and a diversified influx of finance and legal firms. Los Angeles posted double‑digit quarterly gains, largely powered by a flourishing creative sector. Conversely, Boston, Seattle, Washington, D.C., and Chicago saw demand slip as employment growth stalled. Vacancy rates improved to 22.2 % nationally, yet 10 % of office assets—mostly older, oversized buildings— still account for over 60 % of total vacancy, highlighting structural supply challenges.

For investors and landlords, the data signals a shift from pandemic‑era caution to selective optimism. Properties in AI hubs or cities with strong sectoral anchors are likely to command higher rents and lower turnover, while legacy towers may require repositioning or conversion to mitigate excess supply. The continued contraction in office‑using employment suggests that productivity gains could sustain higher space utilization, but any slowdown in AI hiring or a resurgence of remote‑work preferences could temper the upside. Stakeholders should monitor employment trends and vacancy concentration to calibrate risk exposure.