The U.S. office vacancy rate reached 19.4% in June 2025, marking a 130 basis point increase year-over-year and representing one of the highest levels in decades. As a commercial real estate investor, knowing these market dynamics helps you make better investment decisions and protect your portfolio from further declines.
Office markets across the country face significant challenges, with some cities like Austin posting vacancy rates as high as 28% while others like Manhattan maintain more resilient occupancy at 15.2%. The variation between markets brings both risks and opportunities that call for careful analysis of local fundamentals, tenant mix, and economic drivers.
Your success in today’s office market depends on knowing the factors behind these vacancy trends, identifying markets with the strongest recovery potential, and using strategies to minimize vacancy in your properties. The commercial real estate market keeps changing as loan maturities approach and conversion opportunities appear.
Key Takeaways
- Office vacancy rates differ widely by market, with some cities showing resilience while others face record-high vacancy levels
- Remote work, loan maturities, and economic uncertainty are the main factors driving current vacancy trends in different regions
- Investors are adapting by focusing on market fundamentals, tenant quality, and alternative use conversions to stay competitive
Current Office Vacancy Rates and Key Market Trends
The U.S. office vacancy rate reached 19.4% in June 2025, marking a significant 130 basis point increase year-over-year. Major metropolitan areas like San Francisco and Austin show vacancy rates well above the national average, while some markets hold up better through diversified tenant bases and strategic positioning.
National Office Vacancy Rate Overview
The national office vacancy rate of 19.4% stands among the highest levels in decades. This means there are about 902 million square feet of vacant office space across the country.
Key National Metrics:
- Vacancy Rate: 19.4% (June 2025)
- Year-over-Year Change: +130 basis points
- Average Listing Rate: $32.87 per square foot
- Construction Pipeline: 41 million square feet under development
Austin leads the nation with a 28% vacancy rate, even as it maintains the third-largest development pipeline at 2.7 million square feet. This contrast shows a disconnect between construction activity and market demand that investors should watch closely.
Commercial real estate vacancy rates are nearing a 40-year high. The construction pipeline accounts for just 0.6% of existing stock, showing the lowest development activity in recent years.
Major City Comparisons: San Francisco, Houston, and Seattle
San Francisco faces the most challenging conditions with a 27.7% vacancy rate as of June 2025. The market saw a 230 basis point increase year-over-year, yet still commands the highest asking rents at $63 per square foot.
Houston offers a more balanced investment opportunity. The market generated $1.2 billion in year-to-date sales through June, ranking fifth nationally. Office properties sell for about $109 per square foot, making Houston one of the most affordable major markets.
Seattle keeps asking rents at $35.63 per square foot, the only Western market outside California above the national average. The city benefits from its diverse tech economy but feels pressure from remote work trends.
| City | Vacancy Rate | Avg. Rent/SF | YTD Sales Volume |
|---|---|---|---|
| San Francisco | 27.7% | $63.00 | $1.1B |
| Houston | ~20%* | ~$30* | $1.2B |
| Seattle | ~22%* | $35.63 | ~$400M* |
*Estimated based on regional averages
Downtown Versus Suburban Office Spaces
Manhattan’s downtown core stands out with a 15.2% vacancy rate, well below the national average. The market draws strength from legal and finance firms where remote work is less common.
Dense urban living in Manhattan boosts demand for office space, as many residents lack suitable home office setups. Major corporations like Amazon have leased nearly 1.5 million square feet since last fall, including 330,000 square feet at 452 Fifth Avenue.
Suburban markets usually face higher vacancy as companies move into premium downtown locations. The trend favors newer construction and prime locations over older suburban properties.
Focusing on markets with diverse tenant bases and few residential alternatives for office workers can help investors. Boston remains one of the tightest office markets despite a 17.1% vacancy rate, showing how local dynamics can outperform national trends.
Factors Driving Office Vacancy Rates and Long-Term Impacts
Office vacancy rates have reached new highs as workplace dynamics and corporate strategies shift. The pandemic changed work patterns, and major corporations like Amazon are adjusting return-to-office policies, creating ripple effects across property values and city economies.
The Lasting Effects of the Pandemic on Work Patterns
The pandemic changed how employees and employers view office space. Remote and hybrid work models became common, reducing demand for traditional office buildings in every market.
Companies found they could keep productivity high with smaller office footprints. Many organizations downsized their office space by 20-40% during lease renewals, which directly increased vacancy rates.
Employee expectations now favor flexible work arrangements. This shift means you need to rethink what tenants want from office space in 2025 and beyond.
The U.S. office market faces vacancy rates of 20.1%, the highest levels ever recorded. These rates reflect permanent workplace changes, not just temporary disruptions.
Long-term leases have lost appeal for tenants who want flexibility. Companies now prefer shorter lease terms and spaces that adapt to changing workforce needs, which affects your ability to secure steady, long-term rental income.
Corporate Return-to-Office Strategies: The Role of Amazon
Amazon’s return-to-office policies set an example for how corporate America uses office space. The company’s choices influence how other large employers shape their workplace strategies and space needs.
Major corporations use different approaches to office returns. Some require full-time office presence, while others stick with permanent hybrid models, leading to inconsistent demand across markets and property types.
Key Corporate Strategies:
- Full return-to-office mandates (like Amazon’s approach)
- Hybrid models with 2-3 days in office
- Flexible arrangements based on role requirements
- Hot-desking and shared workspace concepts
These varied strategies make it harder to evaluate tenant stability and predict long-term occupancy rates. Companies with strict return-to-office policies may keep larger spaces, while flexible employers reduce their footprints.
State and local government policies also play a role. Some regions offer incentives for keeping office presence, while others support distributed work models, which affects regional vacancy rates.
Impact on Property Values and City Economies
Office building values have dropped as vacancy rates rise and rental income falls. Properties in central business districts saw the steepest value declines, with some markets seeing 30-50% reductions from peak values.
Your investment portfolio feels pressure from several directions. Lower occupancy means less net operating income, while higher vacancy brings more marketing and tenant improvement expenses to attract new tenants.
Financial Impact Breakdown:
- Rental Income: Down 15-40% in major markets
- Property Values: Decreased 20-50% from 2019 peaks
- Operating Costs: Higher due to longer vacancy periods
- Financing: Lenders have tightened standards for office properties
City economies feel the impact of reduced office occupancy through lower tax revenue and less spending at local businesses. Restaurants, retail shops, and service providers that rely on office workers see significant revenue losses.
Commercial real estate markets show resilience despite challenges, as investors focus on asset quality and tenant credit strength. Still, office properties remain the most challenging sector for stable returns.
The effects reach beyond property owners. Municipal budgets feel the strain as commercial property tax revenue declines, which can affect funding for infrastructure and public services that support business districts.
Frequently Asked Questions
Current office vacancy rates vary a lot across major markets, with some cities above 30% while others remain much lower. These differences create both challenges and opportunities for commercial real estate investors.
What are the current trends in office vacancy rates across major cities?
Office vacancy rates have reached historic highs in many metropolitan areas after pandemic-related changes in workplace patterns. American offices hit a 20.1% vacancy rate according to Moody’s, which is the highest level since tracking began in 1979.
Major cities show different patterns based on local economic conditions and return-to-office policies. Denver’s overall office market reached 24.9% vacancy, while submarkets like Cherry Creek have much lower rates at 8.6%.
Class A properties in prime locations continue to attract more tenants than older buildings. Premium markets still command higher rents even with elevated vacancy rates, as shown in Denver’s River North area at $49.18 per square foot.
Which cities are experiencing the highest office vacancy rates and what factors are contributing to this?
Downtown Denver stands out with high vacancy numbers, as the central business district hit 34.9% vacancy at the end of 2024, up 2.8 percentage points from the previous year.
Spokane’s downtown area reports vacancy rates up to 28%, which raises concerns for the market’s stability. Hybrid work policies and companies reducing their office space contribute to these high rates.
Factors include delayed return-to-office mandates, safety concerns in urban areas, and companies reducing their real estate needs. Newly constructed buildings often show higher vacancy rates as they look for their first tenants.
How have office vacancy rates changed annually in recent years?
Annual vacancy rate increases have picked up since 2020, with most markets showing steady upward trends. Denver’s central business district vacancy rose 2.8 percentage points year-over-year, highlighting the ongoing adjustment period.
The Denver market added 1.1 million square feet of new but empty office space, leading to a 1.7 percentage point annual increase. Markets remain unpredictable as they adjust to changes from the pandemic.
Sublease space now plays a big role in vacancy rates. Denver ended 2024 with 1.7 million square feet of sublease space available, though this dropped 14.8% from the previous year as companies leased space to others or returned it to direct leasing.
How do different regions compare in terms of office vacancy rates globally?
The data mainly covers U.S. markets, with American offices averaging a 20.1% vacancy rate—the highest since tracking began.
Within the U.S., regions vary widely based on local economic factors. Suburban markets usually have lower vacancy rates than downtown areas, such as Denver’s midtown at 18.1% compared to downtown’s 34.9%.
Metropolitan areas within the same country can differ a lot. For example, Cherry Creek’s 8.6% vacancy rate is much lower than nearby River North’s 46%, showing how specific submarket features influence performance.
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