In 2024, law firm Sidley Austin and consulting giant Deloitte both signed leases at 23Springs, a gleaming 26-story tower in Dallas’s Uptown submarket. The numbers looked like acomeback story: average office rents in the city were rising.
They weren’t. Or rather, the numbers didn’t mean what most people assumed they meant. And that gap between what headline rent data shows and what tenants actually pay is distorting decisions made by mayors, lenders, and corporate real estate teams across the country.
Traditional rent statistics answer a deceptively simple question: “What is the average rent per square foot among leases signed this quarter?” For decades, rent averages have been the best measure of a rental market, shaping how economists, investors, lenders, and policymakers understand commercial, retail, and industrial markets. From how cities set property taxes to how lenders underwrite loans and how companies decide where to expand or sign leases, these figures influence major decisions.
A more illuminating approach – comparing like with like in similar locations, and accounting for the concessions for tenants in lease terms – paints a different picture in Dallas. At best, office rents have stalled. That difference matters: when business leaders and policymakers rely on headline averages that make the market appear healthier than it really is, they may make decisions based on a distorted picture of demand. Business leaders deciding where to expand or how much office space to carry are looking at numbers that do not reflect the true cost—or the true weakness—of the market.
This isn’t just a quirk in Dallas. It’s a nationwide measurement problem.
While rent averages can provide a rough guide to the market in regular times, they often fall short – particularly during unprecedented times. In the years following COVID‑19, they were misleading.
Why the Standard Metric Fails
There’s a few reasons why. First, these averages overlook who is signing leases. During and after the pandemic, many tenants gave up older, peripheral offices and upgraded to newer buildings in better locations with better facilities. These newer buildings charged more rent, and this shift pushes the average up. This can be the case even if landlords in less‑favored buildings are quietly cutting prices or sweetening terms. Traditional metrics can’t tell the difference between “rents are rising everywhere” and “more leases are being signed for top‑tier buildings.”
Second, rent averages ignore that a lease that looks expensive on paper can actually be very discounted in reality. Landlords often offer months of free rent, and many pay for tenants to build out their space. In Manhattan, for example, the share of total lease value devoted to tenant improvement allowances roughly doubled in the decade before COVID and has remained high. Free rent periods have expanded significantly in the past few years. When standard metrics focus only on the starting rent price, they’re ignoring the concessions that change the value of the lease.
This matters because bad data leads to bad decisions. For example, a mayor who thinks office rents are rising may push through aggressive reassessments and higher property taxes, only to find that the commercial real estate market is far weaker than what the numbers suggested. A lender who underwrites loans on the basis of flattering averages may discover too late that the collateral was overstated. Corporate real estate teams deciding whether to expand, relocate, or renegotiate leases may also misread the true cost and demand for space.
Commercial real estate sits at the center of the financial system. Office towers, shopping centers, and warehouses underpin billions of dollars in loans, municipal tax bases, and corporate balance sheets. When the metrics used to judge these markets are misleading, the ripple effects extend well beyond landlords—to banks, investors, cities, and the businesses deciding where to locate and grow.
A New Way to Measure the Market
To build a clearer picture of the office, commercial, and industrial markets, Columbia Business School and CompStak are collaborating on a new way to analyze publicly available leases. The new Columbia CompStak Rent Index compares similar spaces in similar locations over time and measures the net effective rent tenants actually pay, after accounting for concessions like free months and build-out allowances. It draws rent, lease size and term, concession structures, building characteristics, and precise location from roughly one million detailed leases signed since 2010 across office, retail, and industrial properties in about 130 U.S. metropolitan areas. At each level, the index controls for the stable features of the building and location, and uses the remaining variation to show rent growth or decline over time. By controlling for building characteristics and location, the index isolates real changes in rents rather than shifts in which buildings are leasing space.
What the Data Actually Shows
When rents are analyzed through this index, the market looks very different. For example, in Manhattan, high-rise buildings have landed eye‑catching leases. Average starting rents in prime districts continue to go up, and one can easily assume that office rent prices are finally going up, after years of being battered by work‑from‑home. However, the data through our index shows that quality‑adjusted office rents in Manhattan fell sharply during the pandemic. By mid‑2025 they had only just clawed back to where they started. Manhattan’s office market did not even turn the corner until the second half of 2025, when the quality‑adjusted rents jumped from about $71.60 per square foot in the second quarter to $83.30 in the fourth. The rent increase in top-tier buildings was still happening but there were many buildings struggling to fill space.
In retail too, when a major flagship store signs a spectacular lease in a premier shopping district, raw rent averages jump. This makes it seem that the market is healthy. Yet when we hold quality and location constant, the retail rent index shows muted growth over the last 15 years, with no sustained upward trend. At the same time, industrial real estate is actually showing a real boom. The pandemic turbocharged demand for logistics space as households and businesses leaned into online ordering and just‑in‑time delivery. In that sector, our constant‑quality index and the traditional measures clearly note a strong, nationwide surge in rents for warehouses, logistics hubs, and distribution centers, which has recently cooled a bit due to higher interest rates and a wave of new supply.
Commercial real estate has always been an opaque market where rents are set in bilateral negotiations, recorded in private documents, and reported with delays. When analysts look only at the rent averages, it’s easy to misread the health of the market and make policy and investment decisions on the wrong basis. For business leaders, lenders, and policymakers, the lesson is straightforward: the headline rent numbers don’t tell the full story about the commercial real estate market. Decisions about investment, lending, tax policy, or office strategy should rely on data that reflects what tenants actually pay—not just the averages that dominate today’s market reports.
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