Office Demand is Rebounding…and Landlords are Getting Creative.

CoStar’s latest report shows something we haven’t seen in a while: real signs of life in the U.S. office market. Tenant demand is up, net absorption turned positive last quarter, and even older buildings are starting to see renewed leasing activity. CoStar now projects a net gain of about 10 million square feet of occupancy over the next year, with rent growth expected to reach 1–1.5% annually by 2027.

But the real story is how landlords are responding. They’re reimagining office space to make it worth coming back to. Think shared conference rooms that save space, gyms and walking paths that boost energy, and downtown locations that make people actually want to come in.

Lease terms are shifting too. Smaller spaces in the 3,000–4,000 square foot range are becoming the sweet spot, and 7-year leases are now more typical than 10, and 5 is the new 7. Tenants would love shorter three-year commitments, but that’s tough to make work given today’s high construction costs. Tenant improvement allowances are RANGING from $5 and $8 per square foot for each year of the lease term. 

Overall, the tone of the market is changing. Companies may still want flexibility, but they’re also realizing that the right space — one that feels good to come to — can make all the difference in attracting and retaining talent.

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