U.S. office performance is on a heater to start 2026, bolstered by strong leasing activity, improved asking rent growth and an uptick in office investment volume.
San Francisco skyline
Underlying office fundamentals continue to improve as the asset class ascends from the murky depths of the pandemic. Office leasing activity in the first half of the year hit 127.3M SF, the strongest leasing volume in the first six months of a year since 2019, according to a Savills report.
The first-half volume was 13% ahead of 2025, and the 66.1M SF of leasing activity in the second quarter was 9.1% above the quarterly average between 2017 and 2019. The brokerage attributed the banner quarter to a wave of demand from artificial intelligence boosting markets that saw a sizable falloff during the pandemic.
Tech company Palo Alto Networks inked the biggest deal of the quarter, signing a 941K SF renewal in Santa Clara, California. Close behind it was law firm Simpson Thacher & Bartlett’s 916K SF Manhattan relocation, according to Savills.
Over the past four quarters, leasing demand has been rising or stable across 84% of markets, according to Savills. West Coast tech hubs San Francisco, Silicon Valley and Seattle all posted 34% or more year-over-year gains in leasing volume.
In conjunction with the increase in leasing activity, overall office vacancy saw its largest quarterly decline since 2015, dipping by 30 basis points in Q2 to 18.3%, according to CBRE. Top-shelf office vacancy outpaced the broader market, falling 40 basis points to 12.3%.
Rent growth is also running ahead of historical trends. Average asking rent increased by 2.6% year-over-year to $37.58 per SF in Q2, the fastest pace in six years and above the 30-year average, according to CBRE.
Though office demand dropped to $18.7B in Q2 from $20.3B in Q1, first-half investment volume was still up 15% year-over-year, according to Savills.
CBRE forecasts total office investment volume for the full year to increase by 16% in 2026.
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