The office sector is nowhere near the glory days of the pre-pandemic era, but gleams of light are showing through the gloom as return-to-office and coworking policies restore some of its former luster.
The national vacancy rate peaked back in March 2025 and in December 2025 fell to 18.4%, which is 10 basis points lower than in November and 140 points lower than in December 2024, according to Yardi Matrix’s latest report on the national office outlook.
Of the top 25 metros, 17 saw vacancy rates decrease in 2025. In five, vacancy plunged by more than 300 bps: Houston (Kirby Grove, 430 bps), San Francisco (the Sand Hill Collection, 370 bps), the Bay Area (235 Lytton Avenue, 320 bps), Orlando (CNL Center II, 310 bps) and 50 Hudson Yards (Manhattan, 300 bps).
“Despite the recent decreases in vacancy rates, they remain far above the historical norm, and it is still to be determined if these drops will continue,” the report cautioned.
“[Vacancy] is unlikely ever to approach pre-COVID levels. The relationship between workers and the office has fundamentally changed, and only another seismic shift on the scale of Covid will alter that.”
Co-working is one of the factors that changed the worker-office relationship. In 2025, co-working’s share of the office market rose to 2.2% and over 1,000 locations were added.
It was a boon for companies unwilling or unable to assume the costs of a long-term office lease but unwilling to switch to a fully remote work environment. Co-working is a competitive alternative to traditional office spaces, the report said. At the same time, it may attract tenants underserved by the traditional model.
The national average full-service equivalent list rate was $32.86 per square foot in December, up 9 cents from the previous month and down 0.8% year-over-year. The highest price per square foot was scored in Manhattan ($250), followed by San Francisco ($199.20) and Miami ($165). Houston came in at $54.21.
The report also noted a significant fall-off in new offices under construction and starts leveling off. It identified 30.9 million square feet of office space under construction or 0.4% of the stock, compared with 54.7 million square feet in January 2024. It was the second successive year in which deliveries fell. In a low for the decade, only 42.4 million square feet of office stock was added nationally. Projects under construction were most active in Boston, Miami, Austin, San Diego and Dallas.
Starts also declined from previous years but appeared to be leveling off. In 2025, 13.2 million square feet were started.
“The decline in office projects is expected to continue as corporate culture turns its back on the full-time in-office work environment of years past and embraces a hybrid work model. As such, the prospect of funding new projects is limited, while existing offices struggle to fill vacant space,” the report commented.
“The flight to quality in the office sector shows that demand for office remains; however, many tenants have shifted their attention to smaller, amenity-laden jewel box properties and away from larger properties,” it added.
Lower interest rates – especially if the Fed enacts two further rate cuts – combined with discounted properties, could lower the cost of conversion projects. Nationally, 23.4% of all office buildings are candidates for conversion, the report stated.
Through the end of December, $53 billion in office sales were recorded nationwide. The average price was $192 per square foot. The highest number of sales (119) was in the Bay Area at an average price of $392 per square foot, an increase of 35% year-over-year and the first in four years.
On an annual basis, 42,000 jobs were added in the office-using sector as a whole. However, office-using sectors of the labor market lost a combined 35,000 jobs in December, including 29,000 in professional and business services and 12,000 in IT. Financial services gained 6,000 jobs.
The metro with the highest growth in office-sector employment was Charlotte. The city was buoyed by its low cost of living, low corporate tax rates set to be eliminated in 2030 and business-friendly approach.
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