After several years of uncertainty, the U.S. office market began showing early signs of stabilization in 2025. A rebound in leasing activity during the second half of the year, combined with historically low levels of new office construction and an increasing number of building conversions, helped slow the rise in vacancy and signal the beginning of a gradual recovery. While the sector continues to face structural shifts in how space is used, improving demand trends and constrained supply are creating a more balanced market environment heading into 2026.

Net absorption turned positive in the final two quarters of 2025, offsetting occupancy losses earlier in the year and bringing the national vacancy rate down slightly to 14.0%, from a peak of 14.2% at midyear.

Selective Demand & Limited Supply Begin to Stabilize the Office Market

Despite this progress, recovery across the office sector remains uneven. Some markets are seeing renewed leasing momentum driven by stronger office attendance and steady demand from professional and financial services firms, while others continue to experience occupancy losses as tenants right-size their space requirements.

Leasing activity has improved but remains below pre-pandemic levels. Average lease sizes are still 15–20% smaller than before 2020, reflecting ongoing uncertainty around workplace strategies and the limited availability of large blocks of high-quality space. As a result, many larger tenants are opting to renew in place, while smaller tenants compete for fewer available spaces in the most desirable buildings.

Supply trends are also reshaping the market. Less than 40 million square feet of new office space was delivered in 2025, the lowest level since 2011, while more than 35 million square feet was removed from inventory through conversions and redevelopment. This minimal net supply growth has helped stabilize vacancy levels and reduce downward pressure on rents.

Improving fundamentals have also begun drawing investors back into the sector. Office sales volume increased more than 25% in 2025 compared to 2024, and pricing appears to be stabilizing, though distressed sales are expected to continue as some owners adjust to the new market environment.

Source: CoStar News

Segmented Strength: How Northern Colorado's Office Market is Adapting



While national headlines often focus on distressed office assets and elevated vacancy rates, the Northern Colorado office market tells a more nuanced story. The region’s approximately 18.7 million square feet of office inventory continues to adapt to evolving workplace strategies, with clear signs of stability in certain segments and increasing selectivity among tenants.

One of the most notable trends locally is the growing divide between modern, well-located office properties and older, traditional buildings that have not kept pace with tenant expectations. Demand has concentrated in Class A buildings, properties that have undergone significant upgrades, or those located near major transportation corridors and employment centers. In contrast, aging Class B and C buildings, particularly those without modern amenities or convenient access, are finding it increasingly difficult to compete in today’s hybrid-driven workplace environment.

Source: CoStar

Smaller Deals, More Selective Tenants

Tenant behavior in Northern Colorado also reflects a slightly different pattern than larger metropolitan markets. While many companies nationally have significantly reduced their office footprints, local tenants have taken a more measured approach. Hybrid work has changed how space is used, but not necessarily whether it is needed.

This shift is evident in leasing trends. Since March 2025, the region has recorded more than 240 office transactions, with an average deal size just under 2,000 square feet. Rather than large expansions, the market is being driven by smaller, highly targeted space decisions as tenants prioritize efficient layouts, flexible lease terms, and spaces that support collaboration when employees are in the office.

As tenants become more selective, landlords have had to adapt their strategies. Successful leasing today often requires competitive tenant improvement packages, flexible deal structures, and investments in building upgrades that better align with modern workplace expectations. Properties that offer updated common areas, natural light, convenient access, and nearby amenities continue to outperform.

The region’s office market fundamentals also remain relatively stable compared with many larger markets. Vacancy rates in Northern Colorado generally remain well below the national average, supported by steady demand from professional services firms, healthcare providers, construction and engineering companies, and locally based businesses.

Another bright spot is the continued appeal of office locations along major growth corridors. These areas benefit from central access, proximity to expanding residential communities, and modern building inventory, making them particularly attractive to employers seeking to recruit and retain talent in a competitive labor market.

Source: CoStar, Colorado Real Estate Journal

Office: Fort Collins, Loveland & Larimer County

Source: CoStar

Office: Greeley & Weld County

Source: CoStar

Office Isn't Disappearing, It's Evolving



The office market, both nationally and locally, is not returning to the pre-2020 model. Instead, it is settling into a new phase defined by quality over quantity.

Across the country, vacancy is expected to plateau through 2026 before gradually declining, while rent growth will likely remain modest. The strongest performance will continue to occur in trophy and well-located Class A buildings, along with select Class B properties that offer compelling locations and updated amenities.

Northern Colorado reflects many of these same dynamics, but with a key distinction: the region’s strong population growth, diversified economy, and relatively balanced supply have helped cushion the more severe dislocations seen in larger office markets.

The takeaway is clear. The office sector is not disappearing, it is evolving. Companies still value physical workplaces for collaboration, culture, and client interaction, but they are being far more intentional about where and how they occupy space.

For landlords and investors, success in this next phase will depend on recognizing that shift. Buildings that offer modern layouts, flexibility, and access to amenities and transportation will continue to attract tenants, while properties that fail to adapt may struggle to remain competitive.

In Northern Colorado, the fundamentals remain solid. The market is not booming, but it is far from distressed. Instead, it is steadily adjusting to the realities of today’s workplace; creating opportunities for owners who are willing to invest, reposition, and meet the evolving expectations of the modern office user.

Source: CoStar News, Colorado Real Estate Journal

Realtec is here to help navigate the changing market