The first three months of 2026 were the most active period for office landlords since before the pandemic.
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Office tenants signed roughly 120M SF in new leases in the first quarter of the year, a 25% increase compared to the first quarter of 2025 and the highest quarterly total since 2018, according to a CoStar report.
The surge was largely driven by a higher volume of smaller leases — a trend that emerged after the pandemic. The number of leases signed hit its highest point going back a decade.
“While the quarterly figure signifies continued momentum for national office recovery, the composition of leasing activity reflects an intensification of patterns that have emerged in the leasing office market since the pandemic began,” CoStar National Director of Office Analytics Phil Mobley wrote in the analysis.
Since the beginning of 2023, new lease sizes remained about 15% below pre-pandemic averages, due in part to restricted hiring and the lack of larger space in newer buildings, according to the report.
Smaller leases also tend to be more fluid with shorter terms, promoting more leasing activity.
Amid the surge, almost half of the nation’s largest office markets have had leasing return within 10% of their pre-pandemic averages — primarily led by Charlotte, New York City, Miami and San Francisco, which are above their 2015 to 2019 averages.
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The demand from banks and financial institutions, which have maintained a higher in-office attendance record, has uplifted leasing recovery. That trend is particularly strong in Charlotte, where Citigroup, JPMorgan Chase and Sumitomo Mitsui Banking Corp. have all announced significant expansions.
But there are still a handful of metropolitan areas — including Atlanta, Washington, D.C., Chicago, Denver, Seattle, San Diego and Philadelphia — that are still below 20% of their pre-pandemic average of office leasing activity.
Looking forward, the first quarter’s momentum may not be sustainable through 2026 amid economic and uncertainty pressures, Mobley wrote.
“On the demand side, the return-to-office movement is reaching its apogee, and job growth remains tepid,” he wrote. “Rising energy costs associated with the conflict with Iran also present a headwind to economic growth and, in turn, to demand for office space."
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