Office leasing down 2pc in Apr-Jun across top 7 cities; new supply falls 28pc: Colliers

Why this matters

The reported 2% decline in office leasing across the top seven US markets, coupled with a 28% drop in new supply, underscores the ongoing recalibration of institutional capital toward office real estate. Leasing softness signals persistent demand challenges amid hybrid work models and tenant downsizing, reinforcing caution among allocators and lenders. Yet, the sharp contraction in new supply suggests developers are responding to these headwinds by pulling back, which could help stabilize fundamentals over time by limiting oversupply risks. For institutional investors, this dynamic highlights a bifurcated market environment: near-term leasing velocity remains subdued, pressuring income growth and asset valuations, while constrained development pipelines may support longer-term scarcity value. Lenders, meanwhile, face a nuanced risk profile—reduced construction activity eases new loan origination but may also limit refinancing opportunities and heighten scrutiny on existing office portfolios’ cash flow resilience. Overall, these trends reflect a market still digesting structural shifts in office demand, with capital flows likely to remain selective and disciplined. The interplay between muted leasing and curtailed supply will be critical for assessing timing and risk in office allocations going forward.

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