Office Real Estate Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

Global Office Real Estate Market Trends and Insights

Flight-to-Quality and Mandated Returns Lift Demand for ESG-Prime Assets

Mandatory on-site policies at major banks and professional-services firms have steered tenants toward buildings that make commuting worthwhile. Wells of demand concentrate on towers carrying LEED v5, BREEAM v7, or WELL Health-Safety badges that now command 8-12% rent premiums over uncertified peers in New York, London, and Singapore^{[1]U.S. Green Building Council, “LEED v5: What You Need to Know,” usgbc.org}. Landlords racing to capture this premium are investing USD 15–25 per square foot in advanced HVAC, circadian lighting, and touchless access to reduce absenteeism and reinforce brand equity. The trend aligns with corporate Scope-3 reporting rules, making green space a compliance tool rather than a perk. As a result, prime vacancy in core submarkets sits below 10%, while secondary and tertiary assets register vacancies above 20%, confirming a secular flight-to-quality split.

Record-Low New Construction Tightens Prime Vacancies

U.S. office deliveries dropped to 38 million square feet in 2024, the lowest total since 2009, because high financing costs and uncertain leasing halted groundbreaks^{[2]Bureau of Labor Statistics, “Producer Price Index Nonresidential Construction Q3 2024,” bls.gov}. Scarce supply has pushed Class A vacancy below 8% in Manhattan’s Hudson Yards, San Francisco’s Mission Bay, and Seattle’s Denny Triangle, enabling landlords to secure rent escalations that outrun inflation. The shortage is most acute for contiguous blocks of 50,000 square feet or more, space coveted by AI developers and chip designers who require dense power and collaboration zones. Tech giants now pre-lease years in advance; Nvidia reserved a 500,000-square-foot tower in Santa Clara for 2027 occupancy. Such early commitments are feeding a virtuous cycle of higher asking rents and rising stabilized values for the limited cohort of still-pipeline prime projects.

Easing Rates and Repricing Draw Institutions Back to Core Offices

The U.S. Federal Reserve’s 2024 shift from rate hikes to policy stability compressed trophy-office cap rates by 50–75 basis points between mid-2023 and late-2024. BlackRock’s USD 7.3 billion take-private of ElmTree Funds and Rithm Capital’s USD 1.6 billion purchase of Paramount Group illustrate how dry-powder capital is targeting defensive income streams in gateway markets. Improved liquidity also supports CMBS issuance, which climbed 18% year over year to USD 12.3 billion in 2024, allowing investors to lock in cheaper debt for energy-efficient assets. At the same time, deep discounts on under-amenitized towers give opportunistic buyers room to fund upgrades; a Midtown Manhattan building that traded at a 67% discount to its 2019 value underscores the scale of repricing. These converging forces are nudging institutional allocations back toward the office bucket after a multi-year hiatus.

AI and Semiconductor Corridors Spur Large-Block Leasing

Generative-AI labs and semiconductor design hubs have become the single most active source of large-block absorption. OpenAI’s 486,600-square-foot Mission Bay lease, TSMC-linked demand in Phoenix, and Nvidia’s Santa Clara expansion all highlight a requirement for contiguous floors, redundant power, and fiber throughput above conventional specifications. Average Class A rents in Phoenix’s Tempe submarket rose 9% during 2024, mirroring similar premiums in Austin’s Domain and Bengaluru’s Outer Ring Road, as tech occupiers outbid traditional tenants for space. These firms pay for infrastructure rather than skyline views, creating a niche for owners willing to retrofit with liquid-cooled data rooms and micro-grid backup. As AI workloads grow, landlords positioned near talent pools and fabrication clusters look set to capture out-sized rental growth into the 2030s.

Structural Vacancy in Obsolete Assets Persists

Class B and C towers lacking modern HVAC, fiber backbones, or 9-foot clear heights endure vacancy rates above 20% in multiple U.S. metros^{[3]NYC Comptroller, “Potential and Limitations of Office-to-Residential Conversions,” comptroller.nyc.gov}. Goldman Sachs calculates that 330 million square feet, 8% of the national supply, is functionally obsolete and headed for adaptive reuse or demolition by 2030. In Europe, Savills warns that 25% of London offices will miss EPC Band B compliance, likely stranding capital and pushing tenants to greener premises. Conversion economics only work when acquisition costs fall below USD 150 per square foot, a hurdle met by fewer than 15% of listings, prolonging vacancy and hitting local tax bases. Until pricing clears or incentives emerge, obsolete stock will drag absorption and dilute the sector’s aggregate performance.

2025-27 Refinancing Wall Raises Distress and Limits Capex

Roughly USD 929 billion of CMBS office debt matures between 2025 and 2027, with 42% tied to properties showing negative cash flow. Delinquency reached 7.67% in November 2024, a post-GFC high. Borrowers face refinancing spreads 200–300 basis points wider than initial coupons, prompting defaults such as Brookfield’s USD 784 million LA towers in 2024. Cash preservation trumps capital upgrades under distress, further diluting competitiveness versus well-capitalized REITs. The resulting sale wave both weighs on near-term values and resets basis costs for opportunistic investors.

Segment Analysis

By Building Grade: Prime Assets Capture Capital Flight

Grade A towers controlled 56.94% of the office real estate market share in 2025, and this cohort will compound at a 5.27% CAGR through 2031, underscoring an investor and tenant pivot toward energy-efficient, amenity-rich space. The office real estate market size for Grade A stock equated to roughly USD 975 billion in 2026, a figure that captures growing allocations from pension funds and sovereign wealth vehicles. Vacancy gaps prove decisive: Manhattan Class A was 9.8% in late 2024 versus 22.1% for Class C, while similar spreads appeared in London’s West End and Singapore’s Raffles Place.

Capital constraints accelerate divergence. Lenders offer 70% LTV on well-leased Grade A towers but cap leverage at 50% for mid-grade assets, forcing owners of older stock to defer maintenance. European directives that all buildings hit EPC Band B by 2030 compound the pressure. Investors expect a green premium; accordingly, net-zero-ready buildings transacted at cap rates 50–75 basis points firmer than non-compliant peers in 2025. Over the forecast horizon, institutional capital will continue to gravitate toward prime, compressing yields and widening value gaps across grades.

Note: Segment shares of all individual segments available upon report purchase

By Transaction Type: Sales Velocity Rises Amid Repricing

Rental contracts accounted for 78.64% of transactions in 2025, reflecting typical multiyear lease structures that underpin landlord cash flow. Yet sales transactions are slated to grow at a 5.43% CAGR as repricing reveals opportunity in both trophy and distressed blocks. The office real estate market size moving through sale trades reached USD 135 billion globally in 2024, a 15% rebound from the prior year as financing reopened for core assets.

Two distinct capital plays drive sales growth. Core buyers like Rithm Capital and BlackRock chase stabilized downtown icons, betting on long-duration leases and ESG alignment. Meanwhile, private equity harvests value from properties that sold at 40–70% discounts to pre-pandemic prices, a trend epitomized by the 2024 trade of 321 West 44th Street at USD 65 million. Debt markets enable both strategies; CMBS issuance climbed to USD 12.3 billion in January-September 2024 as lenders regained confidence in top-tier collateral. With repricing largely flushed through secondary stock, transaction-volume recovery looks sustainable through 2027.

By End User: Technology Tenants Lead Absorption

IT & ITES occupiers represented 25.14% of 2025 demand, while also posting the segment-best 5.54% CAGR to 2031. Silicon Valley, Austin, Phoenix, Bengaluru, and Shenzhen each logged double-digit absorption gains in 2024 on the back of AI chip design and cloud-services rollouts. These tenants need contiguous blocks for GPU clusters and collaborative R&D, making them willing to pre-lease years ahead at rent premiums. BFSI lines, though smaller in share, claw back space as leadership mandates relocate senior managers on-site five days weekly. Deloitte, Accenture, and EY likewise consolidate into fewer but higher-spec hubs that improve knowledge transfer and brand cohesion.

Hybrid motion continues to influence layouts. Many tech firms cut dedicated desks in favor of collaboration zones, yet total leased area expands as functions co-locate near fabrication plants or research universities. Life-sciences administration adds another niche: Boston’s Seaport and San Diego’s Torrey Pines register 15–25% rent premiums for lab-adjacent offices that facilitate cross-discipline teams. Over the forecast horizon, technology’s appetite for resilient, high-power space should anchor absorption, while professional services secure smaller, more flexible footprints inside prime towers.

Note: Segment shares of all individual segments available upon report purchase

Geography Analysis

North America held 26.84% of the 2025 office real estate market share, buoyed by prime submarkets such as Manhattan’s Hudson Yards, San Francisco’s Mission Bay, and Seattle’s Denny Triangle, each with Class A vacancy below 8% in late 2024. Canada’s Toronto and Vancouver attract U.S. technology and gaming firms that value immigration-friendly labor pools; Class A absorption in Toronto hit 1.8 million square feet during 2024. Refinancing risk clouds the region, however, as USD 929 billion of CMBS debt approaches maturity, threatening leveraged owners of mid-tier properties with forced sales that widen the quality divide.

Asia-Pacific is poised for the fastest 5.95% CAGR through 2031, driven by resilient demand in China’s tier-1 cities, India’s Bengaluru-Mumbai corridor, and Japan’s core wards. Beijing’s CBD and Shanghai’s Lujiazui absorbed 4.2 million square feet in 2024 as foreign enterprises renewed growth plans, while India posted a record 52 million square feet of national absorption, 18 million of which landed in Bengaluru alone. Tokyo’s Grade A vacancy sank to 3.1% in Q3 2024 on the back of corporate consolidations spurred by governance reforms. Australia’s Sydney and Melbourne markets stabilize as hybrid work settles at 2.8 days on-site, with tenants prioritizing buildings sporting NABERS 5-star ratings.

Europe faces twin headwinds of EPC compliance and refinancing hurdles, yet prime districts retain depth. London’s City and West End vacancies eased to 12.8% in late 2024 as banking and legal tenants recommitted to new towers carrying BREEAM Outstanding labels. Germany’s Frankfurt and Munich absorb automotive-linked growth, constrained more by construction-cost inflation than demand. Paris La Défense draws occupiers relocating from inefficient Haussmann buildings, and combined Grade A absorption reached 420,000 square meters in 2024. In the Middle East, Saudi Arabia’s and UAE’s incentives compress prime vacancy, whereas South America’s São Paulo rebounds modestly as currency volatility eases, lowering vacancy to 14.6% in Q4 2024.

Note: Segment shares of all individual segments available upon report purchase