CoStar Group Inc. Upgrades U.S. Office Projections: A Positive Shift Amid Economic Challenges

In a significant update to its forecasts, CoStar Group Inc., the leading global provider of online real estate marketplaces, information, and analytics, has revised its U.S. office market projections for the next few years. The new outlook, announced on October 29, 2025, reflects a notable change in sentiment regarding office space demand amidst a shifting economic landscape.

The revised projections indicate an expected 10 million square feet of positive absorption over the upcoming four quarters, a sharp turnaround from the previous forecast which anticipated a negative absorption of 4 million square feet. This upward revision suggests an unexpected resilience in the office sector as it adapts to changing market conditions.

The report also highlights an optimistic outlook for rental growth in the office sector. CoStar now predicts that rent growth will reach 1% by late 2026, with expectations to increase to 1.5% by mid-2027. This is a significant improvement over earlier forecasts which suggested that rent growth would likely remain below 1% well into 2027.

Phil Mobley, CoStar’s national director of office analytics, commented on the findings: “The revised forecast accounts for the strongest quarter of occupancy gains since 2019, despite stagnant job growth in traditional knowledge industries.”

Several factors are driving this positive change in office absorption rates. Many occupiers, anticipating a return to higher office attendance, have committed to securing additional space, even in the face of tepid hiring. This proactive approach is expected to sustain positive absorption trends for several more quarters, indicating a cautious but optimistic recovery in the office real estate market.

Despite the positive short-term outlook, CoStar's analysis points to potential long-term challenges. The report suggests that per-employee space needs are likely to be lower than pre-2020 levels, which could create headwinds for future demand. Consequently, vacancy rates are projected to remain structurally higher, staying above 13.5% through the end of the decade—marking a full percentage point above the peak seen after the Great Recession.

Mobley noted, “While the current outlook is positive, there are downside risks. Persistent inflation and volatile trade policy suggest that economic growth is still poised precariously.” He emphasized that recent benchmark revisions to employment data indicate a weaker job market over the past year, particularly in key knowledge industries, raising concerns about the sustainability of this recovery.

CoStar Group's revised office market forecast presents a cautiously optimistic view for the coming years, marked by positive absorption and rental growth. However, the company also highlights significant economic uncertainties that could impact this trajectory. As the office market continues to adapt to evolving dynamics, stakeholders will need to remain vigilant of both opportunities and risks to navigate this changing landscape effectively.

With its commitment to digitizing the real estate market and providing comprehensive market intelligence, CoStar Group remains a critical player in the ongoing transformation of the commercial real estate sector.