The State of CRE Office – Third Quarter 2025

From “Three Experts Discuss the Office Market” by Ella Krygiel for BOMA International

Office rent growth varies across the region. According to CBRE, 46 of the 64 markets they track are expected to improve, with a moderate increase in overall gross office leasing activity this year. Yet economic unpredictability and rising material costs mean construction completions will likely remain limited through 2027. To understand how these trends are shaping the industry, we turn to three CRE experts about where the office market is heading.

Let’s start with some recent news. GlobeSt. reports that Manhattan is showing its strongest signs of recovery in years, with office availability reaching its lowest point since January 2021.

Denes Juhasz, Director of Research, NAI Hiffman notes: “A lot of the variation we’re seeing across U.S. office markets depends on local incentives and company return-to-office policies. In cities like New York, Washington, D.C., and Los Angeles, incentive programs are enabling office-to-residential conversions through financial support and zoning flexibility. As more employees return, companies are becoming selective about space, favoring highly amenitized Class A buildings over Class B and C.”

A lot has changed within the past five years. According to Reuters, vacancy rates have climbed to a new historic high, compounding a deepening crisis for property owners and the lenders who finance them.

Some markets are performing better than others. As Steve Chrastka, Executive Vice President, Office Services, NAI Hiffman explains: “It’s more building-specific — for example, Oak Brook, a suburb of Chicago, has buildings that are thriving and others that are not. Tenants are looking for landlords that are well-capitalized and that can perform. Tenant rep brokers know which landlords are on the brink of failure and which landlords are healthy. The healthy landlords are the ones who are going to outperform and see more deals.”

Challenges also show up in deal-making.

“Deals are dying at the construction table,” Chrastka says. “So from a tenant rep perspective, brokers need to understand upfront what a tenant’s budget is, what they are willing to spend in rent and potential additional construction costs, and what they are willing to give up to get the space they want. If the deal can pencil out from a construction standpoint, you would hope you have a better shot at making a deal.”

Even so, there are opportunities emerging. Juhasz shares his view: “While the office market has changed significantly since 2020, it’s not all bad. Office space is being used differently, and more diverse product types are emerging—retail, residential, hotel, and self-storage projects in office-heavy areas. Cities that have embraced adaptive reuse and collaboration between public and private sectors are bouncing back faster while addressing housing shortages.”

Adaptive reuse, converting underused or vacant office buildings into hotels, retail stores or other uses, has the “potential to bring vitality back into office-heavy downtown districts,” according to the Urban Land Institute. This strategy can revitalize urban areas and transform outdated office districts into thriving communities. In practice, this is evident in cities like Chicago and New York.

“I’m really positive about Chicago and New York based on our deals and how the year has been going,” Ben Azulay, Bradford Allen, President, National Brokerage says. “Chicago faces a reputation problem that doesn’t reflect its true market strength, and leaders need to do more to change that. Projects like Google’s Thompson Center redevelopment, opening in 2027, will attract more tech and other businesses to the Loop. Bridging the gap between perception and reality will help the city and its office market.”

Being innovative is key to long-term growth. The World Economic Forum emphasizes that ready-made planning solutions, alternative financing mechanisms and digital-first planning optimization are just a few strategies that can help city authorities achieve objectives and create new opportunities.

In this cyclical market, those who stay focused, keep moving and adapt to challenges are the ones who ultimately succeed. “My advice is to not get caught up in the noise, as the worst thing you can do is freeze when the market feels uncertain,” Azulay says. “There are ups and downs every year, but at the end of the day, this is a cyclical business that rewards those who seek out or create opportunities regardless of headwinds. CRE professionals who keep grinding, keep their heads down and keep showing up will be the ones who succeed when the dust settles.”

About NAI Hiffman:

NAI Hiffman is one of the largest independent commercial real estate services firms in the US, with a primary focus on metropolitan Chicago, and part of the NAI Global network. We provide institutional and private leasing, property management, tenant representation, capital markets, project services, research, and marketing services for owners and occupiers of commercial real estate. To meet our clients’ growing needs outside of our exclusive NAI Hiffman territory, we launched Hiffman National, our dedicated property solutions division, which provides property management, project services, and property accounting services across the country. NAI Hiffman | Hiffman National is an award winning company headquartered in suburban Chicago, with more than 275 employees strategically located throughout North America.

About Hiffman National:

Hiffman National is one of the US’s largest independent commercial real estate property management firms, providing institutional and private clients exceptional customized solutions for property management, project management, property accounting, lease administration, marketing, and research. The firm’s comprehensive property management platform and attentive approach to service contribute to successful life-long relationships and client satisfaction. As a nationally bestowed Top Workplace, and recognized CRE award winner, Hiffman National is headquartered in suburban Chicago, with more than 275 employees nationally and an additional six hub locations and 25 satellite offices across North America.