In the first quarter of 2025, despite lingering economic uncertainties, the demand for office spaces showed remarkable resilience. According to Cushman & Wakefield's Q1 market report, while there was negative absorption during this period, the overall demand surged by 30% compared to the previous quarter and climbed 48% year over year when measured over a four-quarter rolling total. The report highlighted that high-quality office spaces continued to perform better than their counterparts, with a significant portion of U.S. markets experiencing positive net absorption. Additionally, the decline in sublease space availability contributed positively to the market dynamics, and construction activity has reached its lowest point in more than a decade.

The decrease in vacant spaces offered through the sublease market over four consecutive quarters has been instrumental in improving absorption rates. This trend resulted in a 9.5% year-over-year reduction in national sublease availability. Furthermore, the slowdown in new constructions reflects a cautious approach by developers amid economic fluctuations. Although national vacancy rates slightly increased to 20.8%, this rise is slowing down, indicating stabilization in certain markets.

Economic policies, such as tariffs on essential products and materials, have not yet significantly impacted office demand. However, prolonged policy uncertainty could potentially harm long-term investments like leasing commitments. Signs of economic weakness are emerging, including rising jobless claims, increased layoff announcements, and declining CFO optimism. These factors might lead to hesitations regarding major investments.

Despite these challenges, the limited supply of new constructions, decreasing sublease availability, and prior workforce adjustments due to remote work offer reasons for cautious optimism. Recovery across different markets will vary, emphasizing the importance of focusing on individual asset competitiveness rather than entire market trends. High-quality assets remain crucial in navigating these uncertain times.

While some regions face record-high vacancies, others experience constrained availability of premium office spaces. The key takeaway is the necessity of evaluating each property's competitive advantage within its specific market context. This approach ensures a more accurate assessment of opportunities and risks, guiding strategic decisions in an evolving office landscape.