Office Vacancy Declines Across Most Major U.S. Markets

More cities are seeing office vacancy improve as supply shrinks and demand spreads beyond traditional gateway markets.

Nina Dale
July 13, 2026

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Office Vacancy Declines Across Most Major U.S. Markets

Good morning. The office recovery is no longer just a New York or San Francisco story. More than half of the country's largest office markets posted lower vacancy in the second quarter, signaling a rebound that's spreading nationwide.

🎙️ This Week on No Cap: PGIM Real Estate's Soultana Reigle explains why today's market requires a "sharpshooter" approach, and where she's deploying capital. (Thanks to our sponsor, Lennar Investor Marketplace)

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CRE Trivia 🧠

Which iconic Las Vegas resort, developed by Steve Wynn on the former site of the Dunes Hotel, was the world's most expensive hotel ever built at the time, with a $1.6B price tag?

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Market Snapshot

S&P 500

GSPC

7,575.39

Pct Chg:
+0.42%

FTSE NAREIT

FNER

855.68

Pct Chg:
+0.41%

10Y Treasury

TNX

4.561%

Pct Chg:
+0.022%

SOFR

30-DAY AVERAGE

3.63%

Pct Chg:
-0.00

*Data as of 07/10/2026 market close.

Space Tightens

Office Vacancy Declines Across Most Major U.S. Markets

The U.S. office recovery is expanding beyond a handful of gateway cities, with vacancy rates improving in more than half of the nation's largest office markets.

By the numbers: Cushman & Wakefield reported that the national office vacancy rate fell 10 bps in the second quarter, marking the second consecutive quarterly decline. Vacancy improved in 49 of the 92 markets tracked (53%), signaling broader momentum despite ongoing economic uncertainty.

Recovery broadens: The office rebound is no longer limited to trophy buildings or coastal markets. Demand continues to favor high-quality space, while the removal of obsolete offices—including more than 90,000 apartments in the office-to-residential conversion pipeline—is tightening supply and boosting occupancy.

Tech continues to lead: AI-related leasing continues to drive demand, with San Francisco, Orange County, and Midtown Manhattan posting the largest YoY vacancy declines. Secondary markets, including Kansas City, Charlotte, Jacksonville, and Austin, also improved, signaling a broader geographic recovery.

Supply keeps shrinking: The nation's office inventory has shrunk by 33 MSF feet over the past five quarters, with 20 markets removing at least 1% of their office stock through conversions and redevelopment. Meanwhile, sublease availability has fallen 15% year over year to 96 MSF, its lowest level since early 2021 and a historic signal of broader market recovery.

Not every market is improving: Some cities continue to face headwinds. Cleveland recorded the largest YoY vacancy increase, followed by Boston, Oklahoma City, Seattle's Eastside, and Downtown Los Angeles. Still, several remain below the national vacancy rate of 20.1%, while others are beginning to stabilize.

➥ THE TAKEAWAY

Less space, stronger market: Shrinking inventory is becoming just as important as growing demand in the office market's recovery. As obsolete buildings leave the market, vacancy rates should continue to trend lower.

✍️ Editor’s Picks

Why investors buy car washes: QC Capital targets 14% yield with up to 100% year 1 depreciation, flexible liquidity, and Schwab approval. (Sponsored)
Spread resurgence: After a slow April, U.S. and European CLO issuance rebounded as tighter AAA spreads restored market momentum despite ongoing macro and geopolitical uncertainty.
Ohio ascends: Ohio ranked as CNBC’s top state for business in 2026, driven by strong infrastructure, low business costs, market access, and continued investment in economic growth.
Delinquencies climb: Bank multifamily loan delinquencies rose to 1.47% in Q1 2026, reaching a 15-year high as troubled balances grew despite continued portfolio expansion.

🏘️ MULTIFAMILY

Senior squeeze: Senior housing occupancy reached its highest level in years at 89.9% as demand outpaced limited new construction, tightening inventory across major U.S. markets.
Timber troubles: Milwaukee’s unfinished Edison mass timber tower is reportedly heading toward foreclosure after its contractor secured a default judgment over $11.3M in unpaid claims.
Baltimore rebound: Baltimore’s multifamily investment activity surged 40% as investors targeted lower-quality assets amid slowing supply, tightening vacancies, and improving rent growth.
Parsippany financing: A Claremont-Stanbery joint venture secured a $188M refinancing for its 498-unit District at 15Fifteen multifamily property to support lease-up and stabilization.

🏭 Industrial

Market reset: U.S. industrial markets are stabilizing as moderating supply, resilient e-commerce demand, and strengthening large-format leasing point to a more balanced outlook through 2026.
Storage caution: Self-storage CMBS performance remains strong with minimal delinquencies, but rising watchlist exposure signals growing pressure from recent vintages and softer market conditions.
Warehouse hazards: Larger, high-tech warehouses are increasing fire risks as massive facilities, automation, and cold storage systems create more complex and costly incidents.
Fiber expansion: Blue Owl launched Kirkwood Infrastructure Group to develop and operate fiber networks, positioning the firm to capture growing demand from AI-driven data center growth.

🏬 RETAIL

Costco momentum: Costco posted a 10.6% June sales increase as strong U.S. performance and digital growth helped drive continued retail momentum across its global warehouse network.
Retail expansion: Qdoba accelerates its growth strategy with new franchise agreements and acquisitions, targeting 100 annual openings to double its footprint within eight years.

🏢 OFFICE

Artificial intelligence: AI office demand jumped 85% year-over-year, but growth is concentrated in key submarkets like San Francisco, Silicon Valley, and New York where major tenants are driving leasing momentum.
World Trade: American Express broke ground on 2 World Trade Center, marking the final office tower in the redevelopment with a nearly 2M SF headquarters set to open in 2031.
Google’s comeback: Google will occupy 600,000 SF in Chicago’s renovated Thompson Center, bringing a major tech anchor to the landmark building and boosting hopes for downtown office recovery.

🏨 HOSPITALITY

Italian arrival: Dal Moros Fresh Pasta to Go will open its first New York City location with a 1,100 SF lease near Penn Station, adding a new dining concept to Manhattan’s growing retail scene.
Beachfront buy: Ascendant Capital Partners acquired an eight-hotel Virginia portfolio totaling 965 rooms, targeting operational upgrades and capital improvements across coastal hospitality assets.

📈 CHART OF THE DAY

The South Central apartment region remains under pressure from more than 500,000 new units delivered—concentrated in Texas submarkets like Dallas and Austin, but slowing construction is setting the stage for a gradual market recovery by 2027.

CRE Trivia (Answer)🧠

Bellagio. The 3,000-room luxury resort set a new standard for high-end gaming destinations and helped spark a wave of multibillion-dollar developments along the Las Vegas Strip.