CommercialCafe's new report on the U.S. office market shows a sector working to re-establish itself amid a reorganization of office work, with vacancy that, while declining, remains high in many areas and assets still selling at a discount.
The report notes that the relevance and market share of coworking is being driven by workers' demands for workplace flexibility, which in turn is motivating companies to introduce concessions and amenities that resemble coworking. It cited statistics showing attendance in offices ranges from 38% to 66%, with an average of 55%.
The amount of space dedicated to coworking rose to 16.5%, an increase of 30 bps year-over-year to 164 million square feet. This accounts for 2.3% of the total for the office sector.
"Changing needs for office tenants are also evident in lease renewal negotiations pushing for terms that are more favorable for flexibility and, where needed, a leaner footprint," the report stated.
"Popular strategies include proposing shorter leases; offering leniency for early lease termination; adapting floor plans to create workspaces for the size and financial means of smaller tenants; and even partnering with established coworking operators to facilitate the transition to a new normal."
Peter Kolaczynski, director of Yardi Research, added with some thoughts: "As owners lean into turnkey and serviced offerings in addition to traditional lease offerings, we expect this growth pattern to rapidly accelerate."
The national office vacancy rate fell 210 basis points year-over-year to 17.8% in March, but the national office listing rate fell 2% to $32.80 per square foot.
Vacancy dropped in 18 of the 25 largest markets studied. In Austin, the rate fell by 230 bps year over year to 26.2%, yet it remained the highest in the U.S. The report attributed this to the high number of projects in the metro's under-construction pipeline, though it is beginning to slow.
The nation's highest March listing rate per square foot was recorded in Manhattan ($69.80), followed by San Francisco ($62.73), Miami ($59.10), the Bay Area ($53.85) and Austin ($46.48), though rates in both San Francisco and the Bay Area were lower than the previous year. In addition to these two, rates fell in Seattle, Detroit, Denver, Boston, Houston, Orlando and Charlotte, among other metros.
The report also identified another trend: properties selling at a discount. In March, 549 transactions were recorded across a volume of almost $12.8 billion at an average sale price of $220 per square foot, though this specific data does not identify any discounts. However, in Los Angeles, 57% of office properties were sold at a discount. One notable deal was the sale of Western Asset Plaza in Pasadena for nearly $98 million – 32% below its previous sale price in 2012.
At the same time, office supply continued to expand. In March, nearly 29 million square feet or 0.4% of stock -- was under construction in the markets tracked. In 1Q 2026, developers delivered 4.3 million square feet.
Medical office starts fell 17.3% -- even so, that was equivalent to an increase from 10.9% in 2020 to 25.8% in 2025.
"Robust job growth in the health care sector and a high resistance to disruptions like remote work and automation job displacement has kept the sector afloat and maintained high developer interest," CommercialCafe commented.
In most Western markets, March vacancy rates averaged above 20% -- higher than the national average of 17.8%, with the only exceptions being Los Angeles (15%) and Phoenix (16.6%). The highest vacancy in the region was in Seattle (24.8%), followed by San Francisco (23.8%).
Asking rates were highest in San Francisco, the Bay Area, San Diego and Los Angeles. Among Western metros, only Portland, Phoenix and Denver had asking rates below the national average. Northern California led in sales volume, with the Bay Area totaling $763 million in the first quarter and San Francisco $754 million. Los Angeles and San Diego together accounted for 65% of the 5.7 million square feet in development in the region.
The Midwest offered some of the most affordable office space in the nation, measured by listing rates and sale price per square foot. This group was led by Detroit and Minneapolis/St. Paul. At the other extreme, Chicago was the priciest for leasing, but its 18.2% vacancy rate was above the national average. In the first quarter, metro-area deals totaled $534 million. The region generally saw little new development.
In the South, asking rents were highest in Miami, Austin and Washington, DC. They were the only Southern markets with full-service equivalent listing rates averaging over $40 per square foot. The asking rent was lowest in Orlando and Houston.
The highest sales volumes in the first quarter were in Miami ($892 million), Dallas ($859 million) and Washington, D.C. ($588 million). Metros with sales volume of more than $200 million were Atlanta ($210 million), Austin ($355 million), Charlotte ($363 million), Houston ($390 million) and Orlando ($215 million).
Austin and Dallas had the region's highest vacancy rates, while Miami and Tampa had the highest occupancy. The region's office pipeline was dominated by Dallas (2.3 million square feet), Austin (1 million square feet) and Houston (900,000 square feet).
In the Northeast, Philadelphia ($31 per square foot) was the only market in the region where the list price was below the $32.80 national rate.
The highest levels of new office space in the pipeline were located in three markets: Boston (3.87 million square feet), Manhattan (2.92 million square feet) and New Jersey (1.16 million). Together, they represented 23% of the nation's total pipeline. By sales volume in 1Q 2026, Manhattan led the country ($1,817 billion) followed by Boston ($225 million) and New Jersey ($164 million).
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