Coworking Continues to Gain Traction Amid Shifting Market Dynamics   

Key Takeaways: 

• Coworking continues to gain momentum as an alternative to traditional offices, with the total national inventory seeing a 25% yearly surge 
• The national vacancy rate stood at 19.7%, unchanged month-over-month, but up 180 basis points year-over-year 
• Manhattan continued to be the nation’s most attractive office market for investors, starting 2025 with $1.8 billion in total sales 
• Boston has seen one of the biggest surges in vacancy rates, up 490 basis points over the past 12 months to 17.1% in February 
• Chicago has achieved one-third of its 2024 total sales volume only two months into the year, but many assets are sold at discounted prices 

Trends & Industry News

Flex Space Offerings Expand  

Coworking spaces across the nation continue to grow in number and popularity, bringing more options to a sector undergoing massive cultural and technological shifts and filling a much-needed gap for working professionals. Since the peak of the pandemic, coworking has provided an alternative to the rigidity of both in-office and remote-work models. As the relationship between workers and the office continues to evolve, the uncertainties and changing expectations over the last few years continue to redefine work models and collaboration with colleagues. Firms increasingly see coworking as a viable option, leading to the expansion of flex spaces in markets across the country.  

The number of coworking spaces grew over the past year, according to our latest U.S. office market report. Nationally, at the end of February 2025, we tracked 7,814 coworking locations in our database, up 25% year-over-year. Coworking spaces totaled 140.1 million square feet, a 15.2% increase year-over-year from the 121.6 million-square-foot total a year earlier. Moreover, coworking as a percent of total office space has increased to 2.0%, up 30 basis points year-over-year. 

Flexibility reigns supreme. Corporate occupiers are finding coworking to be an increased portion of their real estate footprint, with flexibility in size, terms, and pricing to be key benefits. Growth of total operators and in square footage support this.

Peter Kolaczynski, Director, CommercialEdge 

At the regional level, the South leads the nation in coworking locations, with 1,960 spaces in the Southeast, up 24.2% year-over-year and 999 spaces in the Southwest, a year-over-year increase of 18.8%. The West followed (1,709 spaces, up 16.7%), then the Northeast (1,422 spaces, up 17.5%) and the Midwest (1,121 spaces, up 27.7%).  

The South was also in the lead in terms of coworking surface, with 33.3 million square feet (up 18% year-over-year) in the Southeast and 17 million (up 13%) in the Southwest. The West has 31.8 million square feet, followed by the Northeast with 31.7 million square feet, and the Midwest with 21.7 million square feet. The Midwest has far outshined the rest of the country in year-over-year growth in both locations and square footage. However, as one of the smaller regions, it comprises roughly 14% of locations and 15% of total square feet nationwide.  

Over the past 12 months, the average size of coworking locations decreased 1,524 square feet to 17,932. This was particularly noticeable in the Northeast, where it declined 2,989 square feet to a 22,311 average. The Midwest was the only region to show an increase, up 70 square feet to an average of 19,313. We expect the average size of coworking spaces to further decline in the future as the coworking business model shifts toward the suburbs and away from central business districts. 

Listing Rates and Vacancy

Vacancy Surges Persist Across Top Markets

The national average full-service equivalent listing rate was $33.41 per square foot in February, up 3 cents over the previous month and 5.7% year-over-year. The national office vacancy rate was 19.7%, unchanged from the previous month but up 180 basis points year-over-year. 

Top Listings by Metro Area: February 2025

Boston has seen one of the biggest surges in vacancy rates in the last year, increasing 490 basis points over the past 12 months to reach 17.1% in February. Available space has been growing in the market for two reasons: the impact of new supply and the cooling of the life sciences sector. Since the start of the decade, 20.7 million square feet of office space have been delivered in the market, representing 8% of stock. Many of these new spaces were labs, however, the enthusiasm for life sciences has cooled in recent quarters. 

Supply

2025 Set to Be Another Slow Year for Office Construction 

The office construction pipeline continued to shrink, with 48.6 million square feet of space currently under construction nationally, representing 0.7% of the total stock.  

Office deliveries hit a 10-year low in 2024, with 2025 likely to finish even lower. Construction starts totaled just 11.3 million square last year, and a significant rebound is not expected anytime soon, according to our office real estate outlook. With rising vacancies, an uncertain economic landscape and remote and hybrid work entrenched at many firms, the appetite to build new office space has all but dried up. 

Office Space Under Construction (Million Sq. Ft.) 

Houston was the only office market to eclipse 1 million square feet of office starts in 2024. As the nation’s seventh largest market by office square footage, Houston is seeing development shift out of the CBD and into outlying areas. Although its CBD accounts for 16% of total inventory, no projects are currently underway or in the planning stages there. The largest project started last year in Houston is a 320,000-square-foot building at the mixed-use development City Centre in the Memorial Villages submarket. 

Transactions

Deep Discount on Chicago Office Tower   

Across the U.S., a total of $7 billion in office sales was recorded through the first two months of 2025, with properties trading at an average of $177 per square foot, according to our U.S. office market report. 

2025 Year-To-Date Sales (Million)

Only two months into the year, Chicago has achieved one-third of its 2024 total sales volume, yet many of the sales are at discounted prices. The largest sale so far this year in the market is a 40-story tower at 200 South Wacker, which traded for $68 million in January. The building’s value was nearly 70% lower than its previous sale price in 2013 when it traded for $214.5 million. 

Western Markets

California Markets Still Among the Most Expensive Nationwide 

San Francisco led the Western region and ranked as the second most expensive office market nationwide in February, with in-place rents averaging $63.63 per square foot, reflecting a 4% yearly increase. The Bay Area followed, posting rates of $54.09 per square foot after remaining relatively flat year-over-year. San Diego ($43.07), Los Angeles ($42.62), and Seattle ($36.28) all registered asking rents above the national average of $33.41 per square foot. Meanwhile, Portland remained the most affordable Western office market, with in-place rents at $28.10 per square foot. 

In February, nearly half of the Western office markets posted sale prices above the national average. San Francisco was the third-priciest market nationally, with office properties here trading at $282 per square foot. Meanwhile, the Bay Area and Los Angeles posted sale prices of $208 and $207 per square foot, respectively. These two markets also led the region in total sales volume, with the Bay Area closing $467 million in transactions year-to-date, followed by Los Angeles at $334 million. 

West Regional Highlights 

Western office markets continued to record some of the highest vacancy rates in the nation in February. San Francisco remained the most distressed market in the country with a vacancy rate of 27.8%, reflecting a 380-basis-point year-over-year increase. The Bay Area (26.2%), Seattle (25.9%) and Denver (25%) also continued to rank among the five U.S. markets with the highest office vacancy rates. Notably, the Bay Area saw one of the steepest year-over-year vacancy surges, its rate climbing by 540 basis points, underscoring the persistent challenges in the region’s office sector. 

In terms of office development, San Francisco and San Diego remained the most active Western markets, with each having 3.2 million square feet underway as of February.  However, both San Francisco and San Diego experienced significant year-over-year declines, down from 5.8 million and 5 million square feet, respectively.  

Denver also saw a notable contraction in its development pipeline, shrinking from 2.2 million square feet in February 2024 to just 560,000 square feet a year later. In contrast, office development showed signs of resilience in Los Angeles, the Bay Area and Phoenix, all recording year-over-year increases in office pipelines. 

Midwestern Markets 

Construction Development Remains Hindered in the Midwest    

All Midwestern markets saw relatively flat vacancy rates over the past 12 months, with the highest increase seen in Chicago, at only 70 basis points year-over-year. The market reached a vacancy rate of 18.8% in February, while Detroit recorded the highest vacancy rate in the region, with 24.6% of its office space remaining unutilized. 

The Midwest remained the most affordable region in terms of asking rents in February, with Chicago ($27.16 per square foot), the Twin Cities ($26.23) and Detroit ($21.45) posting the lowest rates among major U.S. markets. Additionally, Minneapolis-St. Paul was the only Midwestern market to register a slight year-over-year increase of 1.5% in asking rents. 

Midwest Regional Highlights

Midwestern markets also ranked among the most affordable in the nation for office investment, with the Twin Cities recording the lowest sale price per square foot nationwide at just $50— a steep decline from the $215 per square foot a year prior. Meanwhile, Chicago posted an average sale price of $67 per square foot, down from $100 per square foot a year earlier. Despite this, Chicago led the region in sales volume and ranked second nationwide, totaling $561 million in office transactions year-to-date. 

Despite leading the region in office development, Chicago had only 738,000 square feet of space underway in February, a major decline from the 1.8 million square feet of space seen a year prior. Meanwhile, the Twin Cities remained among the slowest markets for office development nationwide, with only 430,000 square feet in progress as of February. 

Southern Markets

Transaction Activity in Nashville Among the Slowest Nationwide

Most Southern markets continued to see office assets trade below the national average sale price of $177 per square foot in February, with only Miami and Tampa exceeding this benchmark. Miami led the region at $239 per square foot, followed closely by Tampa at $236 per square foot, placing both among the top five most expensive office markets nationwide. Conversely, Nashville recorded one of the lowest office sale prices among major markets, at just $64 per square foot, while recording just $6 million in office sales year-to-date. Washington, D.C., led the region in sales volume, with $330 million registered year-to-date. 

Miami continued to lead the South in office rents in February, posting asking rents of $55.38 per square foot, while Austin followed with $45.90 per square foot. Washington, D.C ($40.46) and Charlotte ($34.07) were the only other Southern markets with rates above the national average of $33.41 per square foot. Conversely, Orlando remained the most affordable market in the region and the fifth nationwide, with in-place rents at $28.26 per square foot, underscoring the variation in office pricing across Southern markets.   

South Regional Highlights

Austin remained the most active office development market in the South and second nationally in February, with 3.6 million square feet underway. The market also led the nation on a percentage-of-stock basis, with ongoing projects accounting for 3.7% of its total inventory. Dallas-Fort Worth and Houston were the only other Southern markets with over 2 million square feet under construction. Dallas-Fort Worth recorded a sharp decline, as its pipeline reduced by nearly half, from 5.14 million square feet in February 2024 to just 2.88 million a year later, underscoring shifting development trends across major Southern office hubs. 

Amid strong development activity, Austin continued to face difficulties in filling up vacant office space, ranking second nationally with a 27.4% vacancy rate. Similar challenges were seen in Dallas-Fort Worth, with a 23.8% vacancy rate, and Houston with 23.1%. In contrast, Tampa (15.8%) and Miami (15.7%) posted one of the lowest vacancy rates nationwide, underscoring continued demand despite national trends. 

Northeastern Markets

Manhattan Starts 2025 with $1.8B in Office Sales

Office properties in the Northeast continued to command some of the highest sale prices in the nation, with Manhattan leading at $450 per square foot—the second-highest nationwide. Manhattan remained the most attractive office market for investors, starting this year with $1.8 billion in total sales, a notable surge from just $77 million in year-to-date sales a year prior. New Jersey also stood out as a prime market for office investment, ranking fourth nationwide in total sales volume with $409 million as of February. Moreover, it also stood above the national average sales price, with office assets trading at $179 per square foot. 

Despite recording a notable 490-basis-point vacancy rise year-over-year to 17.1%, Boston still ranks among the markets with the lowest vacancy rates nationwide. Meanwhile, Manhattan continued to lead the region in office occupancy, with a vacancy rate of only 16.4%—the fifth lowest nationally among top U.S. office markets. A slight year-over-year decline of 30 basis points further highlighted the market’s stabilization and steady demand for office space. Philadelphia was the only Northeastern market with a vacancy rate above the national average, reaching 20% after a 460-basis-point year-over-year increase. 

Northeast Regional Highlights 

Philadelphia also stood out as the only market in the Northeast with rents below the national average, at $30.86 per square foot. Conversely, the other Northeastern markets remained among the most expensive in the nation, with Manhattan leading at $68.93 per square foot—the highest rate nationally—despite a 3.6% year-over-year decline. Boston was the only Northeastern market to witness rising rents, reaching $47 per square foot after a 3% year-over-year increase. 

Despite leading the nation in office construction, Boston has seen no projects starting construction since April 2024. The market had 6.5 million square feet underway in February, considerably down year-over-year, as it stood at more than double the total square footage in February 2024, at 14.5 million. Manhattan also saw a yearly decrease in construction. However, it stood at a healthy 2.7 million square feet in February, the sixth-largest pipeline nationally.  

Office-Using Employment  

Government Job Cuts Add Pressure to the Office Sector

Office-using sectors of the labor market added 24,000 jobs during February, according to the Bureau of Labor Statistics. While not counted in traditional office-using sectors of the labor market, government employment can represent a significant portion of a market’s office utilization. At the end of 2024, over three million people were employed by the federal government. Naturally, Washington, D.C., is the most exposed to federal workforce cuts. The metro had nearly 375,000 federal employees at the end of 2024, according to the Bureau of Labor Statistics.  

Office Using Employment 

Trepp recently analyzed public lease data and found the federal government leases 149 million square feet of office space. The new administration is already pushing to terminate some leases. We anticipate that job cuts at federal agencies will represent another significant challenge for the office sector, although the impact will vary greatly among markets. 

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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.  

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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