U.S. Office Leasing Volume Lags Historical Norm Despite Recent Recovery

U.S. office tenants signed new leases averaging 105 million square feet over the past four quarters, an improvement from the prior four-quarter period, according to CoStar. The article says demand and supply issues are still preventing leasing volume from fully recovering to pre-pandemic levels.

Analysis

The leasing signal is directionally better but does not yet establish that office cash flows or asset values have bottomed. Leasing volume is a flow; it can improve while occupied space, effective rents, and landlord cash collections remain weak if renewals shrink footprints, concessions stay high, or tenants delay move-ins. The missing comparison period and the absence of vacancy, net absorption, sublease supply, and rent data make this a poor basis for a sector-wide re-rating.

Near term, the main risk is a sentiment bounce in office landlords without confirmation in quarterly leasing spreads and occupancy. Over 1–3 months, those metrics—and lender disclosures on office collateral—matter more than aggregate signed area. Over 6–18 months, sustained demand could reduce new construction and ease pressure on better-located buildings, but obsolete space may still face conversion costs, impairment, or refinancing stress. Better leasing could also benefit fit-out contractors and building-services providers, while weaker buildings continue to compete through concessions.

The contrarian opportunity is dispersion, not a blanket office recovery: aggregate volume can mask a split between buildings tenants actively want and space that remains structurally impaired. A relative long in landlords demonstrating positive net absorption and improving effective rents against short exposure to owners with persistent vacancy is a watchlist trade, not yet a recommendation; verify portfolio-level metrics first. The thesis fails if subsequent data show renewed leasing weakness, rising sublease availability, or no improvement in occupancy and effective rents.

Key Decisions for Investors

• Avoid adding broad office-property exposure on this data point alone; it does not establish improved landlord cash flow or collateral values.
• Track office REIT earnings for same-store occupancy, net absorption, leasing spreads, concessions, and cash rent collections; require improvement across several measures before turning constructive.
• Build a relative-value watchlist: favor landlords with demonstrable leasing and occupancy improvement over owners with persistent vacancy, but verify portfolio-level evidence before initiating positions.
• Monitor bank disclosures on office-loan delinquencies, extensions, and collateral marks as a lagging risk check; this leasing update alone is not evidence that CRE credit stress has eased.