Office rental vacancy

Office rental vacancy has entered a turning point in 2026, with the rate holding at a historically high 20.3% but showing the first signs that upward momentum is easing. This is the highest since the previous peaks of 19.3% during economic downturns in 1986 and 1991. Employers continue to push structured return-to-office mandates, yet hybrid and remote work remain deeply embedded, leaving many buildings underutilized even in prime locations. At the same time, new office deliveries have slowed sharply, as developers react to weaker absorption and rising financing costs, curbing the pipeline and beginning to cap further vacancy escalation. Major coastal and tech-centric markets still struggle with large blocks of obsolete space, while select submarkets with newer, amenity-rich buildings see comparatively firmer occupancy as tenants consolidate into higher-quality assets.

Vacancy has climbed from already-elevated levels to record highs as the post-pandemic workplace reset collided with an overbuilt office stock. Remote and hybrid work rapidly shifted from emergency response to standard practice, with roughly a quarter to a third of paid workdays occurring at home by mid-decade, permanently reducing structural demand for traditional offices. Many occupiers responded by rightsizing footprints, subleasing excess space and concentrating staff in fewer, higher-quality locations. This left older Class B/C buildings and fringe downtown assets especially exposed.

At the same time, the development cycle that began before 2020 pushed a large wave of new, mostly Class A projects into the market just as net absorption weakened, compounding vacancy pressures even in top business districts. Financial tightening and repricing of commercial real estate further amplified distress.