After years of disruption, the West Coast office market is showing signs of stabilization. While recovery is far from uniform, momentum is building across both urban and suburban areas. Many companies are making longer-term decisions again and placing renewed value on in-office work. Challenges remain—from shifting workplace preferences to uneven return-to-office patterns—but leasing tours are increasing, vacancy growth is slowing, and some markets are seeing positive absorption.
Suburban markets generally lead due to accessibility and lower perceived risk, while urban cores benefit from civic reinvestment and policy shifts. This isn’t a story of winners and losers but of a market-wide recalibration, with encouraging signs of pricing stability emerging.
A look across seven West Coast markets reveals where recovery is happening fastest, what factors are driving tenant activity, and how urban policies, building quality, and work models are shaping the next phase of the office sector.
Seattle, WA – Downtown Office Stabilizing
Downtown Seattle’s office market appears to be near the bottom of its cycle, according to Kidder Mathews SVPs Ben Garrett and Rod Keefe. Tenant sentiment is gradually improving, with increased leasing activity in Class A+ buildings as companies focus on quality over quantity. Tenants are signing longer-term leases and making real estate decisions with more confidence, particularly as leasing incentives remain attractive.
Despite Bellevue and other suburban markets experiencing higher rental rates and tighter vacancy, downtown Seattle can retain and attract tenants with its lower rents and better transit access. The return-to-office mandates by major employers, such as Amazon, are catalyzing foot traffic and retail resurgence in the urban core. Safety improvements and city-led revitalization efforts—including “drug-free zones” and sanitation campaigns—are beginning to yield results.
Growth is expected from AI, professional services, and selectively from tech, especially as some firms claim previously unaffordable space. Tenant strategies often include a hybrid model with three in-office days and a strong emphasis on amenities, location, and transit.
Tacoma, WA – Suburban Office Strength
The office market in Tacoma, Washington is gradually improving, with a noticeable uptick in leasing by national credit tenants. Kidder Mathews EVP Will Frame notes that while the average lease size remains small (3,000-10,000 square feet), there is growing alignment between employers and employees on the benefits of in-office work. Secondary markets are outperforming primary markets, as companies are shifting their focus toward locations close to submarkets where their employees live. This is a new trend, referred to as the “hub and spoke” model opposed to a single large regional headquarters.
Class A downtown buildings with updated amenities and activated retail are attracting the most interest, particularly from traditional services (law, finance, architecture). However, the next frontier will be found in the AI space, with cities such as Seattle, Bellevue, San Francisco, and San Jose seeing the most excitement.
Rents across the board are either flat or declining, and concessions continue to rise.
Still, Frame is optimistic, pointing to a growing consensus that in-person work benefits both employers and employees. This shared belief is helping drive a return to office and longer lease commitments—many now stretching 10 years, often with stable or increased square footage compared to pre-pandemic levels. Tenants are favoring two main property types: high-quality suburban offices near I-5 and Class A urban buildings with strong amenities and modernized lobbies.
Portland, OR– Vacancy vs. Investment
Portland’s office market remains challenging, but flickers of momentum are appearing. Direct office vacancy hit a record 15.1% in Q2 2025—Portland’s 11th straight quarter of rising vacancies, according to Kidder Mathews VP of Research Gary Baragona. Yet, investment activity is picking up: sales volume rose 12% year-over-year, led by private buyers and owner-users, who now make up over 90% of all transactions. This marks a major shift from previous years, when institutional investors dominated the market.
San Francisco, CA – Small Office Tenant Revival
San Francisco, one of the hardest-hit U.S. office markets, is finally stirring. Leasing volume is up, driven largely by smaller tenants—65% of 2025 deals are under 5,000 square feet, per Baragona. Shorter terms, longer negotiation periods, and a cautious approach to growth remain standard as tenants continue to right-size for a hybrid future. But here’s the key: these tenants are signing leases again—and that’s a shift from the freeze-frame mentality that gripped the market since covid.
The city is seeing a return of tenants from the East Bay, along with nonprofit organizations moving into high-quality space. “Demand is increasingly coming from AI companies, tech innovators, and traditional users who were previously priced out of San Francisco,” notes Kidder Mathews SVP Paul Picciani, “as well as professional services tenants who are either entering the market or growing to support their technology-focused clients.”
Back-to-back quarters of 2.8 million square feet in deals mark the city’s strongest first-half performance since 2019. Notable names like Coinbase, LinkedIn, Morrison Foerster, Notion, and Databricks are renewing or expanding.
Vacancy remains high at 31.6%, however the rate has roughly plateaued. While absorption is still negative, the rate of decline has slowed considerably. Baragona also points to renewed business confidence tied to recent political changes focused on public safety, downtown revitalization, and adaptive reuse—such as office-to-residential conversions—which should boost downtown energy and foot traffic over time.
Los Angeles, CA – Flight to Quality
Los Angeles presents a mixed picture due to its sprawling geography and multiple central business districts. While some submarkets are gaining traction, downtown Los Angeles still faces perception issues around safety and infrastructure. Los Angeles is navigating a tricky balancing act right now, notes Kidder Mathews COO Eric Paulsen. While vacancy rates ticked up slightly to 15.8%, and leasing activity slowed compared to last year, there are some encouraging signs beneath the surface, especially in certain submarkets. LA also benefits from a diversified tenant base, including media, entertainment, and professional services, which continue to support select leasing activity.
Paulsen points out that the market is still feeling the effects of hybrid work and changing tenant needs. Lease transactions dropped significantly from 2024, with companies leaning heavily on renewals and downsizing where possible. Professional services like law firms and financial institutions are stepping up, helping to stabilize occupancy in areas like Downtown LA and the Mid-Cities. These groups tend to place more emphasis on in-person work, which is a positive driver as offices look to fill desks again.
There’s a clear “flight to quality” happening in LA—tenants are favoring modern Class A buildings with strong amenities, walkability, and flexible lease options. Landlords are responding by redesigning spaces to support hybrid work and offering move-in ready suites to attract those tenants.
City-led efforts to revitalize key corridors are underway, and momentum is slowly building, notes Paulsen. Unlike other cities, LA’s “downtown vs. suburban” narrative is blurred due to the tri-core office structure spread across West LA, downtown, and the San Fernando Valley.
San Diego, CA – Recalibrating Office Market
San Diego’s office market is recalibrating, with contrasting trends between leasing and sales activity. Vacancy rose to 14.1% in Q2 2025, while leasing volume fell 21% year-over-year. Yet transaction volume exceeded all of 2024 by midyear, and the average sale price per square foot jumped from $201 to $296—signaling investor interest, though not without implications for pricing resets.
According to Bryan Geisbauer, SVP in Kidder Mathews’ Carlsbad office, uncertainty around long-term return-to-office strategies continues to weigh on decision-making. “Tenants are still right-sizing and pushing for shorter lease terms as they figure out what the ‘real’ hybrid model looks like,” he explains.
Smaller tenants in the 3,000 to 5,000 square foot range are driving much of the activity, forcing landlords to evaluate their vacancies to accommodate market demand. At the same time, high construction costs are shaping deal structures, requiring longer lease terms to justify the larger allowances required for buildout. “San Diego office users aren’t accustomed to seven- or 10-year leases, which makes tenants lean toward second-generation or ready-to-use space—or choose shorter-term renewals,” Geisbauer notes.
A clear flight to quality continues, with highly amenitized Class A projects attracting the most demand. In contrast, generic or commodity office space—regardless of submarket—is facing persistent headwinds in both absorption and rent growth. Landlords with undifferentiated offerings are under pressure to compete with increased concessions and flexible lease terms.
Downtown San Diego remains particularly challenged. Geisbauer points to rumors that The Irvine Company has its two remaining downtown assets in escrow and have sold the balance of their portfolio over the last 12 months at historically low prices—rivaling what they sold for decades ago. These trades have essentially reset rent structures in the urban core for years to come, giving new owners flexibility to aggressively pursue tenants with deals others may not be able to match.
While uncertainties persist, San Diego’s office market continues to evolve. Strong investor activity, steady demand from smaller tenants, and creative repositioning strategies suggest the market is slowly finding its footing.
Phoenix, AZ – Momentum Returns to the Office Market
After a few bumpy years, the Phoenix office market is starting to show some real signs of stability—and even progress. While it is not out of the woods yet, recent activity across both urban and suburban submarkets suggests that tenants are getting off the sidelines and starting to make more confident, long-term decisions.
Phoenix is outperforming many peer markets because of sustained population growth, favorable business conditions, and moderate development pipelines. The market experienced 390,000 square feet of net absorption YTD, with total vacancy declining 20 bps to 24.3%. Class C space remains tight at 8.3% vacancy, while Class A faces more pressure at 29.9%.
Stronger leasing activity is being reported in traditional Class A buildings, due to the premium asking rents of trophy Class A+ buildings. Select submarkets (North Tempe, Scottsdale, and Camelback Corridor) continue to draw interest due to their access to talent, solid amenity offerings, newer buildings, and shorter commute times for employees.
Adaptive reuse of obsolete office properties into multifamily or industrial uses is further balancing supply and demand, driving transaction activity and overall market health. The outlook remains favorable, especially for well-located assets.
While not yet fully recovered, Phoenix’s office market is showing encouraging signs of momentum. Larger tenants—typically in the 25,000 to 50,000-square-foot range—are actively searching for space.
According to Dave Carder, SVP in Kidder Mathews’ Phoenix office, “Tenants are re-engaging and locking in longer-term commitments through new leases and renewals, particularly in collaborative, flexible office environments with strong amenities.” This shift suggests growing confidence in workplace strategies and signals that well-positioned properties are beginning to benefit from renewed demand.
The Next Chapter for West Coast Office
The West Coast office market is no longer in limbo. Urban cores are regaining relevance thanks to civic initiatives, amenitized buildings, and return-to-office momentum. At the same time, suburban offices remain appealing due to accessibility and proximity to talent.
There’s no single playbook—each market is navigating its own path, shaped by industry mix, local policy, and workforce trends. But across the board, tenants are making decisions again, signing longer leases, and prioritizing quality over cost.
In this transitional period, tenants who act now can still take advantage of favorable lease terms before competition for the best spaces heats up. For landlords and investors, repurposing and repositioning assets will be key themes in the quarters ahead.
While the exact road to recovery remains unknown—it’s clearly in motion.
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