For the first time in six years, U.S. office vacancy fell rather than rose. JLL data show Q3 2025 vacancy edging down to 22.5 %, a 5 bps improvement from Q2 — small but symbolic. Net absorption turned positive by 6.1 M SF, nearly twice its prior cycle high. After fifteen consecutive quarters of erosion, the office market found its floor. What was once a question of survival has become a test of discipline: who owns the space tenants actually want?

Leasing momentum is no longer theoretical. Gross leasing reached 52.4 M SF (+6.5 % QoQ), with activity now 82 % of pre-Covid norms. Deals over 100 k SF jumped 50 % QoQ after a quiet spring, signaling renewed corporate confidence. Amazon’s 1 M SF pre-lease in Seattle and Goldman Sachs’s 700 k SF commitment in Dallas show that large users are again locking space long term. In turn, 18 major metros now exceed their 2019 leasing levels. The psychology has shifted from “offload” to “upgrade.”

The recovery remains uneven. Newer assets (post-2000) saw vacancy drop 104 bps YoY while commodity stock stayed flat. Firms are trading up to modern, amenity-rich buildings as return-to-office mandates spread — 56 % of Fortune 100 companies now require five days in-office. In practice, Class A rents have stabilized (+0 to +1 % YoY) and TI packages are narrowing by two to three months of free rent from a year ago. Meanwhile, older Class B/C owners face heavy CapEx to stay relevant. For many, the future is conversion or creative reuse.

The biggest tailwind is what’s not being built. Only ≈ 6 M SF of new offices remain under construction nationwide — a nine-tenths collapse from 2019’s 50 M SF pipeline. Developers have stopped competing with themselves, and vacancy is finally benefiting. Sublease space has also plateaued as companies reclaim floors they once listed for disposal. Still, new projects are rare: financing costs (L + 400–500 bps) and tight underwriting keep the spigot closed. In turn, existing owners hold scarcer, more defensible space.

Capital markets are reacting — cautiously. Office transactions rose 69 % YoY in September as pricing reset 20–40 % below peak. Lenders prefer extensions over foreclosures, offering time to heal rather than realize losses. Underwriters now model moderate lease-ups (70 % to 85 % occupancy in 3 years) and flat rents through 2025 before 1–2 % growth. The discipline is pragmatic: Class A downtown can stabilize in the low 90 % range, while B-grade suburban plateaus in the 80s. Cap rates stay wide (~7 %), yet risk spreads are no longer widening — a psychological shift worth noting.

Building operators feel the inflection first. Lobbies that sat quiet a year ago are alive mid-week. A tech tenant that had listed two floors for sublease has now withdrawn them, choosing to refit for collaborative use. Engineers report longer HVAC cycles and cafés are back to five-day service. Leasing teams note more qualified tours and fewer tire-kickers. Nonetheless, cost discipline remains tight: utility inflation and labor pressures still erode NOI. The market feels transitional — not bullish, but busy again.

Expect vacancy to edge down incrementally into 2026 (~22.3 % by Q4 if momentum holds). Effective rents in top-tier buildings should rise modestly as concessions normalize. By late 2026, office-to-residential conversions in markets like NYC and Chicago may permanently remove several million SF from inventory, accelerating tightening. If leasing stays strong, prime office cap rates could compress 25–50 bps from 2025 peaks. Policy support and steady employment are key to sustaining the trend. Ultimately, capital will follow evidence — and the data now tilts positive.