Office conversions and demolitions will exceed new construction this year

The U.S. office market this year will have more office space removed than added for the first time in at least 25 years, according to CBRE Group.

Office conversions and demolitions will exceed new construction in 2025. In the largest 58 U.S. markets, 23.3 million sf of space is slated for demolition or conversion to other uses. Developers are projected to complete construction of 12.7 million sf of office space in those same markets.

On the bright side for owners, the net reduction in office space, which CBRE calls “slight,” will likely reduce the vacancy rate over the next few quarters. Office vacancies soared to a record high after the Covid pandemic and remain high at 19%.

The shift in office attendance from the remote-work trend persists, but there are signs of a potential slow reversal. Office net absorption—the amount of space newly occupied in a quarter versus the amount vacated—has been positive for the past four quarters after six straight negative quarters. Office-leasing activity increased 18% in the first quarter of this year, compared with the same time frame the year before.