Office Continues to Struggle in Adapting to New Workplace Dynamics 

Key Takeaways: 

• The average U.S. office listing rate stood at $32.79 per square foot, up 3.3% year-over-year 
• The national vacancy rate reached 19.4% at the end of October, an increase of 160 basis points year-over-year 
• High vacancies persist in most office markets, with San Francisco and Austin recording the highest rate nationally at 27.7%, followed by the Bay Area (26.4%), Seattle (25.8%) and Denver (24.6%) 
• Under-construction office space totaled 60.8 million square feet nationwide, with 8.5 million square feet breaking ground in 2024 and 43.9 million square feet being completed through October 
• Office sales totaled $29.2 billion through the first 10 months of the year, with assets trading at $177 per square foot 
• San Francisco became the most expensive office market in the U.S., with asking rents averaging $69.14 per square foot, surpassing Manhattan for the first time in years 
• Detroit posted the lowest asking rents among leading office markets at $21.46 per square foot and the lowest average sale prices nationwide at $76 per square foot 
• Boston remained the most active market for office development nationwide, with 10.7 million square feet underway (4.3% of stock), 1.1 million of which broke ground this year 

Trends & Industry News

Coworking Sector Continues to Grow

The pandemic has permanently transformed how people engage with the workplace, with remote and hybrid work models becoming deeply entrenched and flexible office space taking on greater importance. 

The total number of coworking spaces continues to grow, according to our most recent U.S. office market report. At the end of the third quarter, there were 7,538 coworking spaces nationwide, an increase of 7% over the previous quarter. Total square footage attributed to coworking spaces was 133.5 million square feet, representing a quarterly growth of over 5 million square feet (4.5%). Shared office spaces account for 1.6% of the total office inventory.  

Los Angeles led the nation in number of coworking locations with 292 spaces, followed by Dallas-Fort Worth (279), Manhattan (275), Washington, D.C. (266) and Chicago (255). However, on a square footage basis, Manhattan tops the list with 11.2 million square feet of coworking space, followed by Chicago (6.6 million), Los Angeles (6.5 million), Washington, D.C. (6.4 million) and Dallas-Fort Worth (5.3 million).  

The national average price for coworking locations remained stable in the most recent quarter. Dedicated desks stayed at an average of $300 per month, while rates for open workspaces ($150 per month) and virtual offices ($120 per month) slightly increased. 

Coworking growth continues to be a bright spot in the shifting office landscape. With new locations emerging in the suburbs and secondary or tertiary markets, operators are expanding the trend of bringing the office to the people rather than the people coming to the office. 

Peter Kolaczynski, Director, CommercialEdge 

While the total amount of coworking space has grown consistently in recent years, the average size of a coworking location has shrunk. In Q3, the national average size of a coworking space was 17,711 square feet, down from 18,132 square feet in Q2. Among the top 25 office markets, 15 saw decreases in their average coworking space size in the quarter. As smaller, community-focused coworking spaces increasingly replace the centrally-located, large, multi-floor flex spaces that were more common before the pandemic, we expect this trend to continue, according to our office real estate outlook. 

The top coworking operators—Regus, HQ, Vast Coworking, WeWork, Spaces and Industrious—account for nearly a quarter of existing flex spaces and over a third of total coworking square footage nationwide. Regus is by far the largest operator, with more spaces than the next five top operators combined.  

Vast Coworking, a new name among top operators, made headlines earlier this year with the acquisition of Intelligent Office, adding it to its existing roster of brands which includes Office Evolution and Venture X. Vast recently announced a partnership with WeWork, allowing Vast franchises to integrate WeWork’s booking software. As the coworking sector adapts to post-pandemic work models, we expect consolidations and strategic partnerships to continue to expand and evolve. 

Listing Rates and Vacancy

Tech Markets See Highest Vacancy Rates

The national average full-service equivalent listing rate was $32.79 per square foot in October, according to our latest U.S. office market report, down 10 cents from the month but up 3.3% year-over-year.  

The national vacancy rate was 19.4%, increasing 160 basis points year-over-year. 

Top Listings by Metro Area: October 2024 

Tech markets continued posting some of the highest U.S. office vacancy rates. These markets have been among the most impacted by the shift to remote and hybrid work, given the adaptability of many tech jobs. Adding to these challenges, a wave of tech layoffs beginning in late 2022 extended into 2023, further dampening office demand.  

San Francisco’s vacancy rate sat at 27.7% in October, marking a 360-basis-point increase over the last year. Seattle’s vacancy rate climbed by 390 basis points to 25.8%, while the Bay Area reached 26.4% after an increase of 630 basis points. Although AI firms signing large leases have made headlines recently, the industry’s footprint remains too small to move the office leasing needle at scale. 

Supply

Life Science Downturn Impacts Pipelines in Major Hubs

Nationally, 60.8 million square feet of office space was under construction, representing 0.9% of stock, our U.S. office market report reveals. The under-construction pipeline has shrunk considerably this year, with 43.9 million square feet being delivered through October and only 8.5 million square feet of space breaking ground in the same period.  

Office Space Under Construction (Million Sq. Ft.) 

The slowdown in construction starts can primarily be attributed to life sciences. In San Francisco, 6.4 million square feet of lab space broke ground between 2021 and 2023, accounting for nearly three-quarters of all starts in the market. However, a pullback in funding from both Wall Street and venture capital has stalled the sector, bringing development in San Francisco to a halt in 2024. Construction starts this year total only 316,000 square feet of office space, 190,000 of which are life science facilities. Lab space now accounts for 85% of the market’s pipeline, but with multiple reports placing the sector’s vacancy rate above 25% in San Francisco, it will likely take years for the existing stock to be absorbed, our office real estate outlook indicates. 

Transactions

High-Quality Asset Trades at Premium Price in Los Angeles 

Across the U.S., a total of $29.2 billion in office sales have been recorded through the end of October, with properties trading at an average of $177 per square foot. Manhattan led the nation in sales volume, logging $3.3 billion year-to-date, followed by Washington, D.C ($2.5 billion), the Bay Area ($2.1 billion) and Los Angeles ($1.7 billion).  

In October, San Francisco became the priciest market for office investment, with properties trading at an average of $392 per square foot. Miami was next, with an average price of $369 per square foot, followed by Los Angeles with $354 per square foot. However, average sale prices in most office markets have still significantly declined over the last 12 months. 

2024 Year-to-Date Sales (Millions) 

While distress and discounted sales dominate the market, one large transaction in Los Angeles shows that the right asset can still attract investors. Last month, Drawbridge Realty paid $185 million to acquire 2220 Coloarado Ave. in Santa Monica, home to Universal Music, for an average sale price of $920 per square foot. The property is highly amenitized, featuring two on-site recording studios. 

Western Markets

San Francisco Becomes the Most Expensive Office Market in the U.S.

Vacancy rates continued to surge across Western tech markets. San Francisco continued to lead the nation in office vacancy with a 27.7% rate, up 360 basis points year-over-year. Up next, the market comprising the rest of the Bay Area recorded the second-highest vacancy rate in the West, reaching 26.4%. This marks a 630-basis-point increase year-over-year, the most notable increase among Western markets. At the same time, asking rents in the Bay Area remained in the high teens, averaging $54.20 per square foot, the third-highest across top U.S. office markets.  

Beyond California, Seattle posted the third-highest vacancy rate in the region and the fourth-highest nationally at 25.8%, up 390 basis points over the past year. Denver followed with a 24.6% rate, marking a 260-basis-point increase over the same period.  

San Francisco became the most expensive office market in the U.S., surpassing Manhattan for the first time in years. Asking rents averaged $69.14 per square foot, slightly higher than Manhattan’s $68.48 per square foot. The San Francisco market, as defined in our report, includes the San Francisco Peninsula in the northern part of the Bay Area, extending south all the way down to San Mateo and Menlo Park, part of Silicon Valley. This rental growth is mainly driven by high rates in the market’s suburban areas, such as Sand Hill Road, the most expensive office street in the nation. The priciest office listing nationwide as of October is Sand Hill Commons in Menlo Park, with an average asking rent of $204 per square foot.  

West Regional Highlights 

Another first is San Francisco leading the nation in sale prices, overtaking Austin, the past month’s leader. Properties in San Francisco traded at an average of $392 per square foot — $53 more per square foot than in September. The market also recorded the fourth-highest sales volume in the West, with $722 million in transactions through September. 

Sales activity was on the rise in Los Angeles, ranking third nationally in sale prices at an average of $354 per square foot and fourth nationally in sales volume, with over $1.7 billion in deals through October. One of the largest recent office deals in Los Angeles was the $187.5 million sale of The Bluffs office campus in Playa Vista. However, the 500,000-square-foot property, whose previous owner defaulted, sold for significantly less than its $413 million purchase price in 2016.  

Development activity has slowed in several leading Western markets, with construction pipelines shrinking over the past couple of months. In San Francisco, the pipeline decreased from 4.7 million square feet in September to 3.8 million square feet in October, as several developments have reached completion and no new projects have broken ground since February. Despite this, San Francisco remained the second-most active office construction market nationally after Boston. San Diego experienced a similar trend, with its pipeline shrinking from 4 million square feet in September to 3.1 million square feet in October. 

Midwestern Markets 

Detroit Posts Lowest Sale Prices Among Top Office Markets

Office markets in the Midwest continued to record some of the weakest fundamentals as we entered the fourth quarter of the year. As of October, Midwestern cities were the most affordable office markets among those covered in our report. Detroit recorded the lowest asking rents nationally at an average of $21.46 per square foot. The Twin Cities came next with $26.13 per square foot, while Chicago followed at $27.23 per square foot. 

Regarding office vacancies, Detroit saw the highest rate at 22.5%, followed by Chicago with 18.5% vacant office space.  

Chicago continued to lead the region in sales volume, with $987 million in transactions through October, surpassing its year-ago sales volume of $858 million. However, sale prices in the market remained below the national average, at $100 per square foot. The largest transaction year-to-date in Chicago was Beacon Capital Partners’ $125 million acquisition of the 36-story tower at 333 West Wacker Drive. The 867,600-square-foot property sold for an average of $144 per square foot —a steep discount compared to its 2015 sale price of $369 per square foot. 

Midwest Regional Highlights 

Although all Midwestern office markets continued to see declining asking rents and sale prices, Detroit is experiencing the most significant distress. Properties in the market traded at an average of $76 per square foot, the lowest price among leading U.S. office markets. This marks a significant difference from the average sale price of $135 per square foot one year ago. Regarding sales volume, Detroit recorded $162 million in deals through October, surpassing only Portland ($161 million) among major office markets. 

Construction activity in Detroit also stalled. After nearly three years with no construction starts, a new office project broke ground last month. Detroit had a total of 524,000 square feet of office space under construction in October, equal to 0.4% of its total stock —the third-smallest pipeline nationally. 

Southern Markets

Austin Sees Highest Vacancy Rate Growth Nationwide

Southern markets continued to be among the most sought-after for office investments. Washington, D.C., ranked second nationally in sales volume, recording nearly $2.5 billion in deals through October — already surpassing its total for all of 2023. Dallas-Fort Worth ranked fifth nationally in sales volume, with transactions totaling $1.1 billion through October. 

Atlanta also saw notable growth in office transactions. After logging $589 million in sales last year, the market has already reached $1 billion in deals by October. However, sale prices in Atlanta continued to trail the national average, at $145 per square foot. Meanwhile, vacancy rates in the market increased by only 80 basis points year-over-year to 17.8%. Asking rents in Atlanta stood at $33.34 per square foot, surpassing the national average. 

Regarding sale prices, Miami saw the most significant surge, ranking first in the region and second nationally with an average of $369 per square foot. The market is nearing $1 billion in sales volume, with $983 million recorded through the end of October.  

South Regional Highlights 

Austin, which led the nation in sale prices in September, saw a sharp decline from $379 per square foot to $287 per square foot, now ranking sixth among leading U.S. office markets. The drop reflects an increase in properties being sold at discounted prices. The most recent transaction in Austin involved the sale of two office assets for $64.5 million by Equity Commonwealth (EQC). One property, Bridgepoint Square, is a 440,00-square-foot office campus acquired by EQC in 1997 for $78 million. The other, Capitol Tower, is a 176,000-square-foot building purchased in 2012 for $49 million. 

Despite these discounted sales, Austin maintained its position as a leader in office development, ranking first regionally and third nationally in square footage under construction. The market’s 3.5 million-square-foot pipeline accounted for 3.7% of its existing stock, placing it second among top U.S. markets on a percentage-of-stock basis. Looking ahead, Austin’s office footprint is projected to grow by 12.1%, including current and planned projects. 

However, the ongoing construction activity, combined with sluggish demand and reduced office utilization, has led to significant spikes in Austin’s vacancy rate. The market recorded the highest rate nationally at 27.7%, equal to San Francisco’s rate. This represents a 710-basis point increase year-over-year, the highest jump among major U.S. office markets. Nonetheless, Austin recorded the second-highest asking rents in the region at $46.75 per square foot, surpassed only by Miami’s $52.84 per square foot. 

Northeastern Markets

Vacancy Upticks Persist in the Northeast

Vacancy rates continued to surge across Northeastern markets, with Manhattan being the sole exception. New Jersey posted the region’s highest vacancy rate at 20.1%, up 260 basis points year-over-year. Philadelphia followed with an 18.9% rate, marking a significant 510-basis-point surge. Meanwhile, Boston’s 16.8% vacancy rate remained among the lowest nationally but showed a 650-basis-point year-over-year increase, the second-highest jump among top U.S. office markets. 

Despite vacancy surges, Boston remained the nation’s most active market for office development, with 10.7 million square feet underway, totaling 4.3% of its existing stock. The life science sector continued to be the primary driver of this activity, with life science projects accounting for 8.6 million square feet of Boston’s office pipeline. However, only 1.1 million square feet of new office projects broke ground in 2024. 

Boston ranked sixth nationally in sales volume, with $1.1 billion in transactions logged through October. However, sale prices in the market declined sharply, from $313 per square foot a year ago to $187 per square foot. In terms of asking rents, Boston remained among the top four most expensive office markets nationwide, with rents averaging $53.35 per square foot. 

Northeast Regional Highlights 

Meanwhile, asking rents in Manhattan decreased by 3.2% year-over-year, averaging $68.48 per square foot. For the first time in years, Manhattan was overtaken as the most expensive office market in the U.S. by San Francisco, although with just a 66-cent difference.  

Manhattan continued to lead the nation in sales volume, reaching almost $3.3 billion through October. This is nearly double Manhattan’s $1.7 billion recorded during the same period last year. However, average sale prices in the market have tumbled in recent months, resulting in Manhattan losing its top spot nationally. In October, sale prices showed a slight revival, increasing by $9 from September to $344 per square foot, placing Manhattan fourth in sale prices across leading U.S. office markets. 

At the other end of the spectrum, New Jersey and Philadelphia were among the five markets with the lowest sale prices nationally, along with Midwestern markets. Properties in New Jersey traded at an average of $98 per square foot, while those in Philadelphia changed hands at $83 per square foot. 

Office-Using Employment  

Sunbelt Markets Lead Amid Weak Overall Growth

Office-using sectors of the economy lost 44,000 jobs in October, according to the Bureau of Labor Statistics. This marked the fourth consecutive month of office job losses, with the sector shedding 118,000 jobs since June. Over that time, the Professional and Business Services sector lost 107,000 jobs and Information declined by 18,000, while Financial Activities added 7,000 jobs.  

Office Using Employment 

Metro-level data for September, which trails the national release, indicates that the Sunbelt experienced the most notable growth in office-using jobs among major markets. Houston led with a 1.6% year-over-year increase, followed by Dallas and Miami (both at 1.5%), Phoenix (1.3%) and Charlotte (1.1%). These were the only markets among the top 25 covered in our report to achieve an increase of over 1% across the past year. However, not all large Sunbelt markets saw gains in office-using jobs — Atlanta declined by 0.9%, while Nashville experienced a 1.9% decrease over the same period. 

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You can also see our previous office reports. 

Methodology 

This report covers office buildings 25,000 square feet and above. CommercialEdge subscribers have access to more than 14,000,000 property records and 300,000 listings for a continually growing list of markets.  

Get access to over 13M commercial property records with regularly verified commercial data, including local market insights, true ownership and construction projects with CommercialEdge Research. 

CommercialEdge collects listing rate and occupancy data using proprietary methods.  

Listing Rates — Listing Rates are full-service rates or “full-service equivalent” for spaces that were available as of the report period. CommercialEdge uses aggregated and anonymized expense data to create full-service equivalent rates from triple-net and modified gross listings. Expense data is available to CommercialEdge subscribers. National listing rate is an average of all markets. Prior to July 2024, this report used the top 50 markets for a national average.

Vacancy — The total square feet vacant in a market, including subleases, divided by the total square feet of office space in that market. Owner-occupied buildings are not included in vacancy calculations.  

A and A+/Trophy buildings have been combined for reporting purposes.  

Stage of the supply pipeline:  

Planned — Buildings that are currently in the process of acquiring zoning approval and permits but have not yet begun construction.  

Under Construction — Buildings for which construction and excavation has begun.  

Office-Using Employment is defined by the Bureau of Labor Statistics as including the sectors Information, Financial Activities, and Professional and Business Services. Employment numbers are representative of the Metropolitan Statistical Area and do not necessarily align exactly with CommercialEdge market boundaries.  

Sales volume and price-per-square-foot calculations for portfolio transactions or those with unpublished dollar values are estimated using sales comps based on similar sales in the market and submarket, use type, location and asset ratings, sale date and property size.  

Year-to-date metrics and data include the time period between January 1 of the current year through the month prior to publishing the report.    

Market boundaries in the CommercialEdge office report coincide with the ones defined by the CommercialEdge Markets Map and may differ from regional boundaries defined by other sources. 

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