Employers planning for “peak” occupancy of their offices is one of the trends buoying the still-protracted recovery of the U.S. office market, according to Newmark executives
The development turns on its head more dire predictions by analysts during the pandemic forecasting that tenants would only need half the amount of space they previously had if employees worked remotely for half of the week, Jessica Morin, head of national occupier research for the New York City-based commercial real estate services firm, told CFO Dive.
“Now office occupiers know they need to meet demand on Tuesday and Wednesdays…so that when people are coming into the office they have a desk spot or they have space to go to,” Morin said in an interview. “So we’re not seeing the huge rate of contraction that we saw in the pandemic.”
To be sure, there has been some shrinkage of the amount of space that tenants are leasing per office-using job. But Morin said the number has only fallen by about 11% to roughly 122 square feet of space, compared to just before the COVID-19 pandemic in 2019. Some had predicted that number would drop by as much as 40%, Morin said.
Newmark’s commercial real estate outlook report is forecasting continued stabilization of the office market in 2026, noting that over 70% of tenants now looking for office space are seeking to maintain or size up their footprint, with most tenants having already “right-sized to hybrid work.” Also helping strengthen the office market: reduced supply of new construction and demand for offices from AI-related companies.
Still, more fallout in the office market from hybrid work is possible as about half of U.S. office leases signed before the pandemic have not yet expired. Some 1.4 billion square feet is still set to expire between 2025 and 2027, which would give tenants an opportunity to adjust and reassess their footprints, according to Newmark’s Q3 2025 office report.
Despite periodic calls from major employers asserting five days a week in the office will be the coming norm, Morin is betting that the current three-day a week hybrid approach will prevail through the coming year.
“My crystal ball tells me that where we are right now is pretty much the steady state,” Morin said. “You’re absolutely going to have a segment of employers continue to push for that five days a week but…I think a lot of employers have accepted the average of three days.”
For those CFOs looking to ink a new lease, there are still deals out there in the current market for those willing to look beyond the top buildings. Asking rents rose 0.5% year-over-year in Q3, but real office rents are still down 19% since 2020, according to Newmark’s Q3 report.
