As remote and hybrid work solidifies into a permanent dynamic, the office sector is facing new realities marked by distress that is expected to continue at least through the end of next year.

The U.S. office market recorded $10.2 billion in transactions through the end of May, with properties trading at an average of $165 per square foot, according to CommercialEdge's National Office Report. Chicago was at the forefront in the Midwest, logging $223 million in office sales year-to-date through May, despite recording the lowest average sale price nationwide at just $81 per square foot. Meanwhile, Manhattan lost its status as the most active market for office investment after leading the nation in sales volume last year. With $570 million in sales through May, Manhattan now ranks fifth in sales, and average sale prices have fallen 66 percent since 2023 to $300 per square foot so far this year, the report found.

National vacancy stands at 17.8%, up 80 basis points from last year.