In the first quarter of this year, recent in-person and virtual office tours reached their highest level since the pandemic began, according to the VTS Office Demand Index.

San Francisco and Fresh York City are leading office demand, while Los Angeles also saw double-digit increases in demand on a quarterly basis, fueled by significant growth in the creative industry, according to VTS.

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Despite the war with Iran and continued economic uncertainty in the U.S., demand for office space is recovering at a strong clip. 

In the first quarter of this year, updated in-person and virtual office tours reached their highest level since the pandemic began, as measured by the VTS Office Demand Index. The index is a future indicator of lease signings about a year or more out. This also touches on aspects of investors.

The index rose 18% from the fourth quarter 2025 and 13% from the same quarter one year ago. 

“Although tested against a turbulent backdrop, demand for office space has seen an exceptional start to the year,” Nick Romito, CEO of commercial real estate software business VTS, stated in a release. “What perhaps is most notable about this quarter’s positive performance is that it was led not just by tech’s sustained AI boom – but also by finance and legal companies entering the sector as well.”

The surge in demand is curious, given that office-using employment is still down 2% from 2022, according to the Bureau of Labor Statistics. Usually, that would result in less office demand, but the drop in employment could also be giving employers more leverage to get workers back into the office.

Nationally, for all buildings, the office vacancy rate fell 14 basis points to 22.2% in the first quarter of this year from the previous quarter and is down 30 basis points from the last peak in Q2 2025, a commercial real estate services and investment management business. Vacancy remains hyper, according to a report from JLL-concentrated predominantly in larger-scale, aging buildings with financially constrained owners, with 10% of office buildings comprising more than 60% of total national vacancy.

As with everything in real estate, the office recovery is local. San Francisco and Updated York City are leading office demand, as AI tech employment rises quickly in the former and diversity of employment fuels the latter. Los Angeles also saw double-digit increases in demand on a quarterly basis, fueled by significant growth in the creative industry, according to VTS.

Cities seeing weaker demand include Boston, which was the worst-performing industry in the report. Life science offices have taken a hit in that city, due to significant government funding cuts.

In addition, demand is contracting in Seattle, Washington, D.C., and Chicago, as they are not seeing strong employment growth. 

“The AI boom continues to be a dominant headline for office, and markets that lack a major tech presence, or are without a primary growth lever in another industry, are seeing declines in demand,” Ryan Masiello, chief strategy officer of VTS, remarked in a release. “LA’s positive performance this time around was a novel bright spot – and it remains to be seen if Los Angeles can sustain growth in the near term.” Furthermore, experts in earnings report note the continued relevance.