Office Market Reaches Peak Downsizing: A New Era for Corporate Real Estate

[Sanjeev Advani]

The office market may be nearing a turning point. A recent CBRE report shows a shift in corporate real estate executives' outlook, with 38% planning to expand their office space over the next three years—up from just 20% last year. At the same time, the number of companies expecting to downsize has dropped to 37%, the lowest since 2021.

This change could signal that the worst of the downsizing trend is behind us. For the first time since Q3 2022, the U.S. office market recorded positive net absorption, meaning more space was leased than vacated in Q2 of 2024. However, office vacancy rates remain high and are expected to peak at 19.8% by mid-2025.

Larger companies are still reducing space, while smaller firms are shifting toward expansion, having reassessed their post-pandemic office needs. This new dynamic makes it crucial for CFOs and decision-makers to strategically navigate leases, using data-driven insights to secure favorable terms in a still-challenging market.

As remote work continues to influence demand, the office market's recovery will depend on how companies adapt their real estate strategies. With careful planning and the right market intelligence, businesses can position themselves to thrive in this evolving landscape.