Rising US office leasing still remains below pre-pandemic pace

Tenants show a continued appetite for small spaces as market recovery gets underway

Bank-focused Charlotte, North Carolina, is among the office markets experiencing leasing volume well above its pre-pandemic average. (Thaddeus Rombauer/CoStar)

By Phil Mobley

CoStar Analytics

October 21, 2025 | 12:42 P.M.

Leasing volume in the U.S. office market ticked up in the third quarter, according to preliminary estimates, but remains just shy of its pre-2020 norm.

The total square footage leased on new agreements — excluding renewals — is estimated to have reached between 100 million and 110 million square feet, or about 1.2% of inventory. While this marks a modest increase over recent quarters, it still trails the quarterly average of 115 million square feet recorded between 2015 and 2019.

A closer look at the data reveals that small lease sizes continue to weigh on overall volume. For more than two years, the average lease size has been 15% to 20% below its pre-pandemic level. At the same time, the number of transactions has been edging upward and is now nearly 10% higher than before 2020.

One possible explanation for this shift is the limited availability of large blocks of premium new space typically sought by major occupiers. With hiring generally slow, many large tenants appear to be renewing existing leases rather than expanding or relocating into new space.

The recovery in leasing is not evenly distributed across the country. A handful of major cities are seeing activity well above pre-2020 levels. New York leads the nation, buoyed by a strong rebound in office attendance and robust hiring by big banks. Charlotte, North Carolina, as well as Miami, Houston and Dallas-Fort Worth, also posted strong and accelerating leasing, driven by comparatively solid population and economic growth. San Francisco, meanwhile, has nearly returned to its pre-pandemic leasing pace, as artificial intelligence companies and other tech firms have begun to backfill a glut of sublet space.

In contrast, leasing in several other markets remains well below pre-pandemic norms. Cities such as Boston, Chicago, Los Angeles, San Diego and Washington, D.C., continue to lag, probably reflecting ongoing adjustments to per-worker space needs and local economic factors.

Despite generally slow hiring and an uncertain economic outlook, the upward trend in leasing volume signals that tenants still have an appetite for office space. However, with the supply pipeline contracting and prime availabilities becoming scarce, sustaining high levels of leasing may prove challenging. Some tenants may find themselves reconsidering space they previously passed over if their needs become acute.