NYC and LA Lead Market Trends for CRE Demand

NEW YORK -- For the first time in 20 months, demand for office space did not increase year-over-year in the first two months of the year, according to the latest VTS Office Demand Index (VODI) report.

However, a surge in March activity reversed January and February’s dip, bringing office demand up 4.6 percent year-over-year by the end of Q1. The slowdown at the start of the quarter reflects growing uncertainty in the economy amid recent tension in global trade.

Declining job postings, slower hiring, and broader concerns over unpredictable policy shifts likely played a role. According to the latest data from VTS, a technology platform that unifies owners, operators, brokers, and their customers across the commercial and residential real estate ecosystems.

It says national demand for office space now stands at roughly two-thirds of its pre-pandemic level.
Job postings and hiring continued to soften in Q1, with postings declining steadily across nearly all major sectors over the past two years. The new hire rate — the percentage of employed workers who started their jobs within the past month — has dropped from around 4.5 percent in early-2022 to approximately 3.4 percent as of early-2025, a level not seen since the early-2010s.

“At first glance, a cooling labor market might seem like bad news for the health of the office sector — but the opposite could be true,” said Nick Romito, CEO of VTS. “In recent years, hiring surged, but employers had limited leverage to bring employees back to the office. Now, as jobs become harder to come by, employers are in a stronger position to require in-office attendance with less resistance.”

The recent slowdown in office demand is disproportionately impacting New York and Los Angeles — the two markets that have led the recovery. In contrast, cities that have lagged in the broader office market rebound, often due to higher rates of remote work with greater exposure to the tech sector, are now emerging as relative bright spots.

San Francisco, long a hub for the tech industry, which has been especially conducive to remote work, posted the largest year-over-year increase in office demand, with a 32 percent rise from March 2024.
Seattle, another tech-heavy market, also saw strong gains, with its VODI climbing 19 percent over the same period.

Boston, also a tech-centric metro, led all markets in quarter-over-quarter growth, with demand surging 68 percent from Q4 2024 and climbing 22 percent year-over-year.

New York City and Los Angeles were the only markets to record a year-over-year decline in office demand. Demand fell 4.7 percent in New York from March 2024, yet with a VODI of 82, it still leads all cities tracked in the report with the highest overall demand. Los Angeles follows closely with a VODI of 74, despite a sharper 13 percent decline over the same period. Despite this, New York and LA remain notable standouts nationally, as their markets were the first to rebound from low office demand due to the pandemic and have led the charge nationally in the post-pandemic recovery.

“New York and Los Angeles were early leaders in the office market recovery, largely because of strong cultural pressure to return to in-person work and a high degree of industry diversity,” said Ryan Masiello, Chief Strategy Officer of VTS. “In those cities, being physically present in the office was seen as the norm — and that social expectation drove demand back to near-normal levels by the summer of 2021. In contrast, cities like Seattle and San Francisco lacked that same cultural push due to being dominated primarily by the tech sector. Even as companies were hiring rapidly, they struggled to bring employees back amid resistance. Now, we’re seeing a shift, as a cooling labor market gives employers more control and workers, faced with fewer options, less power to push back against return-to-office policies.”

With more than 60% of Class A office space in the U.S., and 13 billion square feet of office, residential, retail, and industrial space managed through its platform worldwide, VTS is utilized by over 45,000 professionals and over 1.2 million total users.

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