The key takeaway from various Q1 2026 office reports is that the office market continues to stabilize, due to shrinking inventory and growing demand.
Additionally, “the most expansionary demand has come from large occupiers, who are experiencing space constraints due to a mismatch of early-pandemic flexibility and current normalization of office attendance,” according to JLL’s “Office Market Dynamics.”
Net Absorption: Positive
Net absorption has remained positive over a two-, three-, or seven-consecutive-quarter period, depending on the report.
The one holdout was Cushman & Wakefield’s “MarketBeat,” which reported negative net absorption in Q1. However, “The broader trends continue to improve,” the report said, adding that four-quarter rolling net absorption exceeded 5.2 million square feet, “its highest total since the first half of 2020,” the report noted.
At the same time, all reports said that vacancy continues to decrease, with “the combination of shrinking inventory and improving demand putting a lid on vacancy increases,” the Cushman & Wakefield analysts said.
According to CBRE’s “Office Market Report,” annual leasing activity in 2026 will surpass 2019 levels.
Construction Activity: Muted
Colliers’ “U.S. Office Market Statistics” said that “new development continues to diminish,” with the current pipeline total representing a “significant decrease” from its 2019 peak.
JLL’s “Office Market Dynamics” write-up noted that, while demand continues to increase, so does the appetite for office development. However, “projects may experience extended development timelines due to intense construction labor demand, stemming from labor center development,” the JLL analysts commented.
The Technology Factor
Speaking of data centers, JLL and Cushman & Wakefield addressed the impact of artificial intelligence on the office sector. Cushman & Wakefield experts commented that “investors and tenants need to be paying attention to the economic, capital markets, labor and property-level indicators that will foreshadow how AI will transform the built environment.”
At the same time, JLL analysts noted that fears of AI-driven job displacement in office-using roles are impacting public equity markets. However, “the most likely long-term outcome is task decomposition, where discrete tasks are automated, but most jobs are retained, with human labor reallocated to different tasks,” the report commented.
Looking Ahead
The reports indicated that macroeconomic concerns will potentially impact office-using strategies. JLL said that while “office-using jobs are tentatively expanding,” increased job gains will be essential “to impact sentiment at large.”
Meanwhile, supply will continue to be constrained. Cushman & Wakefield explained that “the current economic and geopolitical environment is creating inflationary pressures that might create upward pressures on office construction and fit-out costs.” Additionally, costs of top-tier space will continue increasing due to limited new supply and increasing conversions.
JLL anticipates 50 million square feet decline in net inventory by 2030, while “for trophy tenants, availability will soon stand at historic lows in most U.S. markets.”
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