U.S. Office Market Posts Vacancy Improvement as Coworking Model Gains Ground

May 21, 2026

By: Wiss Team

Wiss Team

Data sourced from CommercialCafe’s April 2026 National Office Report, based on Yardi Research data.

The U.S. office market closed the first quarter of 2026 with a national vacancy rate of 17.8%, down 210 basis points from March 2025, according to CommercialCafe’s April 2026 National Office Market Report. The improvement marks a continuation of a gradual recovery, though significant variation across markets and property types continues to define the sector.

Average national listing rates fell nearly 2% year-over-year, settling at $32.80 per square foot in March. With just under 29 million square feet currently under construction, the supply pipeline remains historically constrained, a condition that is broadly expected to support further vacancy improvement over the coming quarters.

Coworking Expands as Traditional Owners Adapt

One of the more consequential structural shifts identified in the report is the accelerating adoption of coworking and flexible office formats. According to Yardi Research data cited in the report, the coworking sector’s total footprint expanded 16.5% year-over-year in March 2026, reaching 164 million square feet nationally and representing 2.3% of total office inventory.

The growth reflects both direct expansion by coworking operators and a broader shift in how traditional office landlords are responding to tenant demand. With physical office occupancy averaging around 55% nationally over the past three years, according to Kastle Systems’ Back-to-Work Barometer, property owners are increasingly adopting strategies that include shorter lease terms, flexible floor plan configurations, and partnerships with established coworking operators.

“Coworking continues to carve out a successful segment of the office universe,” said Peter Kolaczynski, Director at Yardi Research, in the report. “As owners lean into turnkey and serviced offerings in addition to traditional lease offerings, we expect this growth pattern to rapidly accelerate.”

Manhattan and Miami Lead Sales, Boston Tops Development

Transaction activity through the first quarter of 2026 totaled nearly $12.8 billion across 549 office sales, with an average sale price of $220 per square foot. Manhattan led all markets with more than $1.8 billion in year-to-date sales. Miami ranked second at $892 million, followed by Dallas at $859 million.

The two coastal markets also posted some of the tightest vacancy figures nationally. Manhattan’s vacancy rate stood at 13.1% in March, down 340 basis points from a year earlier. Miami recorded a 12.5% vacancy rate, a 300-basis-point improvement over the same period and among the lowest readings of any major U.S. market.

On the supply side, Boston led all markets with nearly 3.9 million square feet of office space under construction, followed by Manhattan at 2.9 million square feet. Dallas and Los Angeles each had more than 2 million square feet in their development pipelines. Together, those four markets accounted for the majority of active construction nationally.

Discounted Sales Persist, Medical Office Gains Share

Distressed transactions continued to represent a meaningful share of deal flow, particularly in California. According to the report, 57% of Los Angeles office properties sold since the start of 2026 changed hands at a discount to their previous sale price. One notable transaction involved Western Asset Plaza in Pasadena, which sold in March for approximately $98 million, a 32% discount from its prior sale price of $144 million in 2012.

On the supply composition side, medical offices have steadily increased their share of new construction starts, rising from roughly 11% in 2020 to nearly 26% in 2025. The report attributes the shift to robust growth in healthcare employment and the sector’s relative resistance to remote work and automation pressures, which have weighed on demand for general office space. By contrast, general office construction starts have declined approximately 76% since the start of the decade.

Austin Navigates Oversupply While Texas Markets Drive Southern Pipeline

Austin recorded the highest vacancy rate among the 25 largest markets analyzed, at 26.2% in March, though that represented a 230-basis-point improvement from a year earlier. The city has been working through an extended period of oversupply following aggressive development in recent years, with the active pipeline shrinking to approximately 1% of existing stock in March from 3.3% twelve months prior.

Across the South, Texas markets collectively dominated the regional construction pipeline, with Dallas, Austin, and Houston combining for nearly 58% of regional development and roughly 14% of the national total.

The full report and underlying data are available at CommercialCafe.com.

This article reports on data from CommercialCafe’s April 2026 National Office Market Report, produced using Yardi Research data. The report covers office buildings of 25,000 square feet or larger. Listing rates reflect full-service or full-service equivalent asking rates for available spaces as of the report period.