Over the past several years, the office market has experienced one of the most dramatic shifts in commercial real estate history.
You’ve probably seen both headlines:
Employees are returning to the office.
Office demand is still down.
Both are true at the same time.
Across many markets, office attendance has steadily improved compared to the lows during the pandemic and in subsequent years. Most companies now operate with some form of in-office expectation, often three to four days per week. Yet despite more people showing up to the office, leasing activity still feels slower than it did before 2020.
So, what’s going on?
The short answer is this: companies are back in the office, but they are using space very differently.
What the Data Actually Shows
Office attendance has improved meaningfully since 2021, but it has not returned to pre-2020 levels.
According to Kastle Systems’ Back to Work Barometer, office utilization across major U.S. cities has generally stabilized around 45% to 55% of pre-pandemic levels.
Source: https://www.kastle.com/safety-wellness/getting-america-back-to-work/
At the same time, employment has largely recovered.
The U.S. Bureau of Labor Statistics shows that employment in professional and business services has returned to and exceeded pre-2020 levels in many categories.
Source: https://www.bls.gov/
So, we have two realities:
Companies rebuilt their workforce.
People are coming back to the office.
But space usage has changed.
Hybrid Work Changed the Math
Before 2020, most businesses planned office space around a simple assumption.
One employee equals one desk 5 days per week.
That model no longer holds for numerous industries.
Today, teams can operate on hybrid schedules. Not everyone is in the office at the same time.
Research from McKinsey supports that hybrid work is now a long-term structural shift rather than a temporary trend.
Source: https://www.mckinsey.com/featured-insights/future-of-work
Because of that, companies can operate with less space.
It’s common to see a business that previously occupied 20,000 square feet now operating efficiently from 12,000 to 15,000 square feet.
Same team size.
Less office space.
That shift alone has reduced overall demand, even as in-office attendance improves.
Companies Are Taking Longer to Decide
Leasing decisions is also taking more time.
Before COVID, the leasing process was straightforward. Growth meant more space. Lease expiration meant a decision.
Today, business owners are asking better questions:
How often will our team actually be in the office long term?
Do we need flexibility?
Should we grow into space or wait?
Deloitte research shows companies are taking a more cautious, long-term approach to real estate decisions due to workplace uncertainty.
Source: https://www2.deloitte.com/us/en/insights/focus/human-capital-trends.html
As a result:
More short-term renewals.
More delayed decisions.
Fewer immediate relocations.
That slows leasing activity across the board.
The Office Has a Different Purpose Now
The office itself has changed.
It used to be designed for individual work. Rows of desks. Private offices. Everyone present every day.
Now it’s centered around collaboration.
Companies are prioritizing:
Meeting space.
Collaboration areas.
Flexible seating.
Client-facing environments.
This allows companies to support the same workforce with less square footage without sacrificing productivity that was common when most employees were 100% remote.
The Flight to Quality Is Real
Not all office buildings are impacted equally.
One of the biggest trends today is the flight to quality.
When companies do lease space, they are prioritizing:
Newer or renovated buildings.
Strong locations.
Amenities that attract employees.
Academic research from MIT’s Center for Real Estate supports that higher-quality buildings are outperforming older inventory in today’s environment.
This is not a disappearance of demand.
It’s a shift in where demand is going.
How This Is Playing Out Nationally
This trend is happening across the country, but each market shows it a little differently.
Dallas–Fort Worth continues to see strong population growth and corporate relocations. Leasing activity remains active, but tenants are taking less space and focusing on higher quality buildings.
Houston remains more cautious. Companies are active, but decisions are slower and more selective, with continued pressure on older inventory.
New York City shows a clear divide. Trophy buildings are performing well, while older buildings continue to struggle. Attendance has improved, but tenants are downsizing.
Miami has been one of the stronger post-2020 markets due to corporate migration and population inflows. Even there, companies are prioritizing efficiency and quality over total square footage.
Across all markets, the pattern is consistent:
Employees are returning.
Companies are using less space.
Decisions are taking longer.
Denver Is a Clear Example of This Shift
Denver reflects the national trend, but in a more visible way.
Not all submarkets are performing equally.
Downtown Denver has struggled since 2020. Leasing activity has slowed, vacancy remains elevated well above many other markets, and daily office traffic is less consistent.
At the same time, Cherry Creek has held up much better.
Why?
It aligns with what tenants are prioritizing:
Walkability.
Amenities.
Higher-quality buildings.
A better overall employee experience with safety being a strong factor.
Companies are no longer just choosing square footage. They are choosing environments.
In many cases, they are willing to lease less space if it means getting a better location and higher-quality building.
A Major Shift: Businesses Are Buying Office Space
There is another trend gaining serious momentum.
More businesses are choosing to buy office space instead of leasing it.
Since 2020, this has become a much more common conversation.
Why?
Companies are downsizing their footprint, making ownership more attainable.
Some sale prices have adjusted.
Owners want control over long-term occupancy costs.
Many business owners want to build equity instead of paying rent indefinitely.
Federal Reserve data indicates that while large institutional office transactions have slowed, smaller owner-user activity has remained active in many markets.
Source: https://www.federalreserve.gov/
SBA loan programs continue to support owner-user acquisitions for small and mid-sized businesses:
https://www.sba.gov/funding-programs/loans
For the right company, buying a 5,000 to 20,000 square foot office building or condo can make a lot of sense.
Instead of leasing excess space, they right-size and turn occupancy into an asset.
Landlords Are Adjusting
Existing Landlords are adapting and many are selling their properties at deep discounts. New landlords often have a much lower cost-basis which allows them to offer tenants more competitive lease terms and larger incentives to transact a lease deal.
Many owners are investing in lobby and space renovations to stay competitive in the marketplace. Others are offering more flexible lease structures and increased tenant improvement packages.
The market is evolving. It just takes time.
How Fountainhead Commercial Helps Businesses Navigate This Market
Making an office decision today is not as simple as it used to be.
You’re not just comparing buildings and rental rates.
You’re trying to align your real estate needs and financial obligations with how your business actually operates (or how you expect it to operate for the foreseeable future).
At Fountainhead Commercial, we work directly with business owners to evaluate the full picture before making the decision to renew, expand, contract or relocate the office.
We start with often overlooked questions :
How is your team actually using the office today?
Are you paying for space you no longer need?
Conversely, did shrinking your footprint negatively impact your ability to grow your team?
How does your current commercial space support productivity, peer-to-peer learning and culture?
Would owning property put you in a stronger long-term financial position than leasing?
From there, we build a strategy tailored for your business.
That often includes:
Right-sizing your footprint so you get the most bang for your buck.
Running a lease versus purchase analysis so you can clearly see the most favorable option.
Identifying the right submarkets and buildings to effectively recruit and retain talent. Creating leverage in negotiations to secure better lease or purchase economics, flexibility, and concessions.
Managing the entire commercial real estate process, through a single point of contact (SPOC) so you can stay focused on running your business.
The goal is simple.
Help you make a commercial real estate decision that supports your growth, reduces unnecessary costs, and positions your business for long term success.
Because your office is no longer just a line item, it is a strategic tool.
What This Means for Business Owners
If you are evaluating your office space today, this market presents real opportunities.
Slower leasing activity, comprised of smaller deals, often creates:
More negotiating leverage.
Better lease terms.
More landlord concessions.
But it also requires more thoughtful planning.
The question is no longer:
How much space do we need?
It’s:
How should our space work for my business?
Final Thought
The office market is not disappearing. It is being redefined.
Companies still need a place to bring people together, collaborate, learn and build culture. Fountainhead Commercial specializes is representing these companies so don’t hesitate to connect with us for a complementary commercial real estate consultation.
