How office rents are climbing again

Article originally posted on CoStar on June 22, 2026

Office asking rents have risen little since early 2020, while real, effective rents have fallen considerably. But going forward, a lack of new supply is giving support to ever stronger rent growth at competitive properties.

The shift comes as tenants are increasingly competing for limited desirable space while continuing to shun many high-vacancy buildings.

Nationally, the average office asking rent is only about 7% higher than it was at the start of 2020 and only in a handful of markets, including South Florida and Las Vegas, have office rents outpaced inflation since 2020. Counterintuitively, properties that are higher quality, rated four and five stars, have as a group seen relatively worse performance, with cumulative rent growth of less than 4%.

Given the turmoil in the office market over the past few years, even this paltry performance may seem surprisingly strong. However, it is still quite poor in the context of consumer price inflation, which has advanced by 30% over the same time.

Even so, this high-level view is misleading, as office tenants looking for premium space have been quick to discover. Rents for space in trophy buildings have increased sharply in some markets, with demand concentrating in the best buildings and availability compressing rapidly amid an ongoing dearth of construction activity.

In certain office submarkets, including most of Manhattan and other highly amenitized and/or transit-oriented nodes, asking rents have resumed increasing at or above inflation in non-trophy Class A and even some Class B buildings.

For landlords of competitive office buildings, the pressure on effective rents is easing. Market participants have long reported elevated offers of free rent and/or tenant improvement allowances, with the value of such concessions increasing as much as 50% from pre-2020 levels. This trend has peaked in most markets; however, in some, it has begun to reverse.

Nevertheless, concession packages remain historically high. Furthermore, from the occupier’s perspective, a building owner’s ability to finance buildout costs has become a crucial factor in leasing decisions. This gravitation toward financially stable landlords has effectively shrunk the pool of competitive space even further.

One variant of this trend is landlord investment in small, pre-built spec suites. This strategy plays well in a leasing market with many tenants, including fast-growing, venture-backed AI startups, eager for turnkey space. For occupiers, these spec spaces may come at a premium face rent, but they provide both certainty and speed to market.

Building owners pursuing this course of action are betting that demand will be steady enough to support rapid future leasing cycles, so they can recoup their costs with minimal additional capital investment.

An unprecedented lack of supply growth in the office market over the coming years should further rein in concession packages and provide a solid foundation for future rent growth across a wider swath of markets and buildings.

Landlords seeking to prevent tenant flight will be under pressure, especially if they lack the capital to keep their office space competitive.