Office Market Trends: How Supply Constraints Are Driving Rents Higher in Key Submarkets

Over the past two years, office development activity in the U.S. has slowed to unprecedented levels. Groundbreakings have averaged under 1.2 million square feet per quarter—a stark contrast to previous years and nearing the historic low of 1.3 million square feet recorded in Q4 2010.

Despite this downturn in new construction, demand for high-end office space remains strong. Rising construction costs and tighter financing have made new developments less feasible, yet tenants continue to pursue premium office locations. This dynamic is pushing rents higher and keeping vacancy rates low in key markets.

Key Trends in Office Leasing and Rental Growth

• Premium Submarkets Are Nearly Full

  At the start of 2025, six major submarkets are over 90% leased, with asking rents exceeding $75 per square foot. These include:

  • Hudson Yards, Manhattan – 95% leased, $210/s.f. asking rent

  • Menlo Park, Bay Area – 98% leased, $150/s.f. asking rent

  • Seaport District, Boston – 94% leased, $97/s.f. asking rent

  • Southwest Submarket, Washington, D.C. – 93% leased, $95/s.f. asking rent

  • Santa Clara, Bay Area – 95% leased, $79/s.f. asking rent

  • West Loop, Chicago – 91% leased, $80/s.f. asking rent

Additionally, Brickell (Miami), Sunnyvale, San Mateo, Mountain View (Bay Area), and East Cambridge (Boston) are all over 85% leased, with asking rents surpassing $100 per square foot in most cases.

• Scarcity of New Supply Will Continue Driving Rents Up

  With office development at a standstill, supply constraints are poised to fuel aggressive rent growth, particularly in Tier 1 submarkets where premium space is becoming increasingly rare. Simultaneously, Tier 2 properties that traditionally absorbed overflow demand may struggle to meet tenant needs, exacerbating the supply-demand imbalance.

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What This Means for Office Tenants:

For businesses seeking office space now or in the coming years, these trends carry significant implications:

✔ Level up your strategy: 

In highly sought-after submarkets, competition is fierce. A well-executed leasing strategy—one that leverages current market conditions while aligning real estate decisions with business objectives—can help secure more favorable terms before rents climb even higher.

✔ Explore approaches that optimize short-term and long-term gains: 

With limited new supply in the pipeline, tenants should assess both immediate and future needs now to ensure they are in the best position today while avoiding being priced out later.

✔ Negotiation Strategies Matter More Than Ever:

As economic and real estate dynamics continue to shift, securing office space requires a negotiation strategy that not only meets today’s needs but also provides flexibility for future growth or restructuring.

Securing favorable lease terms in this environment demands a strategic, forward-thinking approach. With premium office space becoming increasingly scarce, competition is intensifying. The right plan can mean the difference between securing the ideal office location, design, and lease structure—or settling for a costly compromise.

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How to Stay Ahead

If your company is considering relocating, restructuring, or renegotiating a lease, now is the time to act. Procrastinating could mean fewer options and higher costs.

1. Conduct a Needs Analysis 

   Align your real estate strategy with your business objectives. 

2. Secure and Optimize Office Locations, Design, and Lease Terms Ensure your space meets both operational and financial objectives.

3. Maximize Profitability, Recruitment, and Retention Leverage real estate as a strategic asset to support talent attraction, retention, and long-term profitability.

   
   

In today’s evolving office market, a proactive approach isn’t just beneficial—it’s essential.  Companies that take action now will be best positioned for stability, flexibility, and growth in the years ahead.

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Take the Next Step

Many companies lose millions of dollars due to lack of employee engagement, loss of top talent, and inefficient or unneeded office space.

Working with Gregg Metcalf, clients gain the insights, the analysis, and the plan to obtain the lease and office space that retains the best employees, attracts top talent, and maximizes productivity as well as profitability.

To Contact Gregg Metcalf:

email: gregg.metcalf@jll.com

mobile: 404.661.9284

Noteworthy transactions in 2024  

• AIG's 178,666-square-foot lease at 2002 Summit Boulevard

          represented by Gregg Metcalf and team

• Deloitte's 115,000-square-foot lease at Promenade Tower 

  represented by Gregg Metcalf and team.

These, among multiple others represented by Gregg Metcalf and team, reflect a broader trend of large firms consolidating operations and expanding their footprints in the Atlanta market.