Office demand is on the rise, heading for pre-pandemic highs, according to JLL’s Q3 U.S. Office Market Dynamics Report.

While demand increases, supply is shrinking as about 9.6 million sf of office space was removed from the market due to conversions and redevelopments during the quarter.

U.S. office inventory is now down 45 million sf from its late-2023 peak. Just 3.5 million sf of new office product was completed in the third quarter, matching the near-record-low delivery volume from the second quarter. Only 23 million sf of office space is under construction.

At the same time, scarcity of top-tier space is driving more than 20% annual rent growth for new builds, and over 10% for second-generation spaces as they begin to benefit from growing spillover demand, JLL says.

Tech hubs are driving occupancy gains, led by San Francisco (+3.3% YTD), Mid-Peninsula (+1.6% YTD), and Austin (+1.6% YTD).

Asking rates continue to marginally increase as landlord leverage is expanding more broadly across Class A markets. Asking rents grew to $40.51 nationally.