The report noted that average office utilization has been flat over the past two years, with just 54% average attendance. The national office vacancy rate climbed to 19.9% at the end of March, up 170 basis points over the year.

The total share of sales transactions in distress climbed to 10.8% in 2024, with 25 million square feet of office space affected. That was a spike of 39% compared to the previous three-year average of 18 million square feet. In 2024, the size of the average distressed property soared 30% to more than 200,000 square feet, suggesting large properties are increasingly vulnerable, the report said.

The distress was widespread. Distressed transactions in CBDs tripled, and those in urban areas nearly doubled. Suburban distressed sales totals leveled off, representing half of the registered national total. There were 26 distressed transactions in Chicago last year, the country’s highest number.

In March, the national average full-service equivalent listing rate was $33.42 per square foot, up one cent from February and 4.9% year-over-year. The top 10 listings by metro area ranged from $63.83 in San Francisco to $27.89 per square foot in Orlando. In all 10 metros, the rate was higher than in March 2024.

Vacancy rates exceeding 25% were experienced in the five markets with a high concentration of tech firms: Austin, the Bay Area, Denver, San Francisco, and Seattle. The report attributed this to the acceptance of remote work in the tech sector and the lingering effects of the wave of tech layoffs in 2022 and 2023.

Office construction began to slow down nationally in 2024 – a trend “that appears to only mark the beginning of a prolonged contraction of the development pipeline.” Just 2.6 million square feet of starts were logged in 1Q 2025, many of them outside the top office markets. More than half occurred in West Palm Beach, where many businesses have relocated over the decade.

The first quarter of 2025 saw $10.3 billion in office sales nationwide at an average of $183 per square foot. Manhattan led the nation with about $2.05 billion in sales, followed by Washington, DC, with $767 million. The Bay Area, Chicago, and Los Angeles were also in the top five for sales.

In the West, San Francisco had the highest office vacancy rate in the nation in 1Q 2025, up 440 bps annually to 28.6%.

Other metros in the West with vacancy rates above the national rate of 19.9% were Seattle, Denver, San Diego, and Portland. Los Angeles managed to avoid that threshold– “underscoring its relative stability in a region marked by persistent occupancy issues” – as did Phoenix. Construction rose in Los Angeles but contracted in the Bay Area and Seattle. The Bay Area, with the lowest office development pipeline in the nation, led the West in sales volume of $727 million. Office rents climbed across the region.

In the Midwest, Detroit had the highest vacancy rate in the region at 24.5%. However, Chicago, which had a flat vacancy rate below the national average, “signaled early signs of office market stabilization.” Chicago also saw office sales rise from $131 million to $600 million year over year and remains among the most affordable investment markets. The Twin Cities was the only metro in the region to show an annual increase in office rents and a notable increase in construction, while boosting office sales from $11 million in March 2024 to $194 million in March 2025.

The South presented more of a mixed picture. Miami and Austin posted some of the most expensive rents nationwide, followed by Washington, D.C., and Charlotte, while Orlando was one of the region’s most affordable. Orlando and Miami also posted low vacancy rates below the national average, while Austin, Dallas, and Houston had some of the highest nationwide. Miami and Austin were the South’s most expensive office investment markets at $285 and $278 per square foot, respectively. At $767 million, Washington, D.C. had the region’s highest sales volume year to date. Nashville and Miami had the highest levels of office development in the South.

A slowdown in office development in the Northeast continued. Manhattan’s office pipeline shrank to less than half its year-ago level of 3.2 million square feet. Boston’s also fell sharply, though it retains the most active office construction in the nation. Manhattan office sales averaged $439 per square foot, and the metro led the Northeast in investment activity, doubling annual sales volume to reach $2 billion in 1Q 2025. Manhattan remained the nation’s most expensive office rental market, averaging $69.03 per square foot, but had the lowest vacancy rate in the Northeast.

Philadelphia’s $117 per square foot sale price was the region’s most affordable, and its vacancy rate was just below the national average.
Nationally, the report indicated that patience may pay off.

“While the office market outlook seems gloomy in the near term, opportunities to adjust will present themselves as the uncertainty surrounding the sector lifts and things begin to move. As less supply comes online over the next few years, pressure will ease off owners," the report said.

"Office starts halved from 50 million to 25 million square feet in 2023, and again to 12 million in 2024. This will give some much-needed breathing room for owners looking to find their place in this decades-long shift happening in the sector."