Construction Pipelines Remain Sluggish as Office Utilization Patterns Continue to Settle

Key Takeaways:

• The national office vacancy rate was 18.6% in October, following a slight decrease of 90 basis points year-over-year.
• The national office listing rate averaged $32.81 per square foot in October, which was nearly on par with values recorded 12 months prior.
• The office supply pipeline remained modest at the start of November with a little more than 33 million square feet of office space currently under construction.
• Manhattan, N.Y., topped the list for year-to-date sales through October in terms of dollar volume ($6.4 billion). It was followed by the Bay Area ($4.4 billion) and Washington, D.C. ($3.6 billion).
• Manhattan and Miami each averaged close to 13% vacancy in October — the lowest among top U.S. office markets last month.
• Midwestern and Southern markets yielded some of the most affordable office asking rates last month, while Western and Northeastern markets asked the highest rates.
• The Boston; Manhattan, N.Y.; and Dallas office pipelines were the most active and the only ones to surpass 2 million square feet each of new office space under construction in October.

Trends & Industry News

Growing Competition for Tenants Amid a Continually Adjusting Landscape

As hybrid work arrangements are now the standard for most firms in the U.S., a full return to the office is not expected any time soon. Although the number of Americans working from home has steadily declined since the peak in 2021, it’s still significantly higher than 2019 levels. What’s more, office utilization has not evolved equally across metros, partly due to particularities of each metro’s urban and economic ecosystem, as we can see from considering the examples of Austin, Texas, and Manhattan, N.Y.

For instance, according to ACS figures representative of last year, as many as 23% of Austin employees worked from home, whereas that number was a little less than 12% in Manhattan. Meanwhile, office-using jobs accounted for about 30% of total employment in each of the two metros.

Notably, Austin also showed the highest office occupancy at the start of November at 74.6% physical office occupancy relative to February 2020, as measured by Kastle’s 10-city Back-to-Work Barometer. Manhattan was at 57.4%.

As the share of those working from home across the Texas metro increased considerably since the start of the decade, so did the number of office jobs. However, during the same time period, developers delivered nearly 16 million square feet of space (about 16% of stock) — too much for the robust employment growth to absorb at the same pace — which pushed the vacancy rate to almost 27% last month. Consequently, the price per square foot in Austin fell significantly this year for the first time since the start of the decade.

“There is nuance to the intricacies that are driving physical occupancy levels in office markets across the country, but it’s clear New York City has stood out above others in 2025 with increased interest in leasing and investment. What’s more, the city has made a concerted effort to eliminate, reposition or convert obsolete office product.”

Peter Kolaczynski, Director, Yardi Research

Similarly, since 2020, Manhattan added an estimated 16.6 million square feet, which, in the largest office market in the U.S., represented about 3.6% of stock. Although the New York powerhouse saw significantly lower office employment growth than Austin, solid investor interest in the Big Apple has contributed to the vacancy rate here dropping to 13% last month. As such, the sale price per square foot in Manhattan remained the highest in the U.S., despite decreasing in the last two years. Sales activity has also picked up considerably with nearly 60 deals recorded year-to-date.

While development pipelines remain modest at best, a flexibility-oriented approach and creative solutions — such as property conversion and coworking spaces — can do a lot to fill the current gap in demand.

Listing Rates & Vacancy

Charlotte, N.C., Market Fundamentals Hold Strong Against Challenging Trends

The national average full-service equivalent listing rate for office space was $32.81 per square foot in October, which followed a slight uptick of 0.1% Y-o-Y. Meanwhile, the national vacancy rate dipped 90 basis points (bps) compared to the previous year to rest at 18.6% last month.

Although most office markets are still facing some challenges, strong fundamentals continue to uphold success in spite of face-value listing rate and vacancy trends. To that end, Charlotte, N.C., has remained well-positioned even after experiencing a year-over-year increase of 240 bps in vacancy (now nearly 19%) and a 1.2% Y-o-Y dip in the average full-service equivalent listing rate.

For example, even with less than 300,000 square feet of new Charlotte office space under construction at the start of November, developers here delivered more than 7 million square feet (about 9% of stock) since the start of 2021. And, with the market outpacing other large markets in terms of office-using employment growth for most of the year, demand from local job formation remains robust.

Transactions

Downtown Denver Assets See Significant Resale Discounts

In October, year-to-date office sales reached nearly $43 billion across transactions averaging $191 per square foot. Despite still lagging behind the peaks of previous office sales booms, the sale price per square foot of office space in the U.S. has been slowly climbing out of the lows of Q1 2024, as has been the case for quarterly sales totals.

Of course, not all office markets are rising at the same speed. For instance, Denver office space was changing hands for $300 per square foot at the market’s most recent peak in 2022, whereas transactions closed since the start of 2025 averaged $125 per square foot.

Furthermore, within that average is a market that’s still rearranging from the 2020 shift. On one hand, the Broe Group confidently kicked off a new office development promising to deliver the largest floorplates in the Cherry Creek submarket. On the other hand, Brookfield Properties sold two downtown Denver office assets at a significant discount from the initial purchase price: Minnesota-based Wayzata Investment Partners purchased the office tower at 717 17^th St. and 22 office floors at 707 17^th St. for a combined $58.4 million, which was a discount of more than 80% from the roughly $400 million that Brookfield paid for the properties in 2020.

Supply

Slow LA Pipeline Focused on Trophy Office Development

As of October, roughly 33.4 million square feet of office space was under construction across the U.S. markets we tracked for this report. According to Yardi Research data, office construction during the first 10 months of the year added up to nearly 13 million square feet, which was roughly on par with last year’s total. While this represents a slight improvement in what has been a consistently sluggish construction-start pipeline, the current prolonged realignment of the office sector is likely to keep new developments on the slow side.

In particular, Los Angeles was one of the markets where the office construction pipeline slowed considerably after the onset of the pandemic, and that led to one of the lowest vacancy rates among top office markets in the U.S. Consequently, the few office projects to kick off here in recent years are highly amenitized, trophy-grade assets that are designed to attract top-tier tenants. One such example is the JMB Century City Center tower at 1950 Avenue of the Stars. The 37-story high-rise broke ground in 2023 and is slated to deliver more than 700,000 square feet of office space to the Century City, Calif., submarket next year.

Even as some office property owners in the market have struggled to fill large blocks, JMB’s class A+ project signed talent agency CAA to anchor it with a 400,000-square-foot lease, in addition to 150,000 square feet of space for private equity firm Clearlake Capital.

Nearby, the $15 billion Fox Corporation redevelopment of its historic studio lot will reportedly include a 24-story media campus featuring both shared and private offices designed for film and television production, as well as a 35-story office tower adjacent to Avenue of the Stars that would present an opportunity for new corporations moving to Century City, Calif.

Western Markets

Seattle Sees Highest Vacancy, San Francisco Tops Rents as Development Cools Across Region

Vacancy rates were above the national average of 18.6% in October in the majority of the Western U.S. markets we surveyed for this report. In fact, aside from Los Angeles (14.6% vacancy) and Phoenix (17.4%), all markets in this group had vacancy rates higher than 20% last month. Among them, Seattle office space saw the highest vacancy rate in the region with 27.4% of space unoccupied. Next, San Francisco was second in the region with vacancy averaging 26% last month. Then, Denver and the Bay Area each had close to 23% vacancy in the office sector.

Partly boosted by performance across the wider suburban tech ecosystem, asking rents for office space in San Francisco topped the regional list with rates here averaging a little more than $65 per square foot in October — double the national average of $32.81. Nearby, Bay Area office space remained the second-priciest in the region last month with asking rates approaching nearly $52 per square foot, on average, and closing out the small circle of Western U.S. markets where rates surpassed $50 in October.

Not to be outdone, Los Angeles (#3 with asking rents averaging nearly $47 per square foot) and San Diego (#4 at close to $45 per square foot) closed out the standout block of California markets at the top of the list for rents.

 

Otherwise, Phoenix, Denver, and Portland, Ore., remained the only large markets in the region where office asking rates rested below the national average in October, each just below $30 per square foot.

Then, looking at total market office sales in the region, the Bay Area retained its top spot as transactions closed here since the start of the year amounted to nearly $4.4 billion. Further south, Los Angeles office space followed in second place with nearly $2.2 billion in sales closed through the first 10 months of the year. It’s worth noting that San Francisco, San Diego, and Phoenix were the only other markets in the region to see year-to-date sales surpass $1 billion last month.

During that same timeframe, the Bay Area also stood out for sale prices: Since the start of the year, office space here commanded the highest average sale price per square foot in the Western U.S. ($386). That made it the only market in the region where office sales closed for more than $300 per square foot, on average.

California markets also led the region in terms of development last month. Specifically, Los Angeles had nearly 2 million square feet under construction, followed by San Diego with nearly 1.4 million square feet. At the start of October, the other Western U.S. markets we analyzed had less than 1 million square feet of new office space under construction. So, the roughly 850,000 square feet of Phoenix office space currently in development added up to the third-largest pipeline in the region, followed by development in the Bay Area (nearly 800,000 square feet) and Seattle (730,000 square feet).

Midwestern Markets

Chicago Tops Asking Rates, Twin Cities Boasts Lowest Vacancy

The top Midwestern U.S. office markets we looked at for this report remained some of the most affordable in the country in October, both in terms of average listing rate and for-sale price per square foot.

First, Detroit office space remained the most accessible in this region with asking rents here averaging less than $22 per square foot. Not far behind, office space in Minneapolis, St. Paul, and the wider Twin Cities submarkets averaged a little more than $27 per square foot, following an increase of about 4% Y-o-Y. Occupancy levels in the Minnesota market last month also kept vacancy below the national average of 18.6%.

Chicago office space was the priciest in the region last month with asking rents averaging more than $28 per square foot, while the vacancy rate here was roughly on par with the national average.

 

As you might expect, Chicago — the largest office market in the region — had the highest regional year-to-date office sales total in October. However, the $990 million worth of office space that sold here since the start of the year changed hands for the lowest price among top markets in the region with an average of $64 per square foot. That was well below the national average of $191.

Additionally, construction in the region cooled significantly by the end of October with a combined total of less than 1 million square feet of office space under construction across the Midwestern U.S. markets we analyzed.

Southern Markets

Florida Yields Both Highest & Lowest Asking Rates in Region

In the South, Miami; Austin, Texas; and Washington, D.C. topped the list in terms of asking rents. They also remained the only Southern U.S. markets to see full-service equivalent listing rates averaging above $40 per square foot in October. At the other end of the ranking, office space in Orlando, Fla., as well as in Houston and Tampa, Fla., had the lowest asking rents in the region, averaging less than $30 per square foot.

Looking at office sales, we found that three of the Southern U.S. office markets we analyzed for this report recorded totals higher than $1 billion during the first 10 months of the year. First, Washington, D.C. had the highest year-to-date sales total as office transactions here amounted to nearly $3.6 billion through October. During that time, office space in Washington, D.C. changed hands for an average of $174 per square foot.

Next, sales of Dallas office space added up to more than $2.5 billion and represented the second-highest year-to-date total in the region last month. Since the start of 2025, office space in the Texas metroplex changed hands for an average price of $290 per square foot. Then, in third place, we have office space in Atlanta, which traded for a total of $1.2 billion this year through October.

 

Looking at leasing data, office space in Miami had the highest average full-service equivalent listing rate in the region in October at a little more than $56 per square foot. The Florida market also stood out with the lowest office vacancy rate (13.4% last month) among the Southern U.S. markets we compared.

Interestingly, only two other markets in this regional group saw lease rates average more than $40 per square foot last month — Austin, Texas, and Washington, D.C. Office space in Austin asked an average of nearly $46 per square foot, whereas asking rates for Washington, D.C. office space averaged $40.50 per square foot in October.

Austin also had the highest vacancy rate in the region last month (close to 27%), followed by Dallas (22%). Likewise, Washington, D.C., and Houston each averaged a little more than 20% and were the only others among the Southern U.S. markets we analyzed to see vacancy higher than 20% last month.

As for construction, data showed that the three most popular Texas markets carried most of the office pipeline in the region: Last month, nearly 2.6 million square feet of office space was in development in Dallas, and close to 1.6 million square feet was under construction in Austin. Staying in the Lone Star State, Houston (home to the third-largest pipeline in the region) had roughly 1.3 million square feet of office space in development last month. Not far behind, Miami was the only other Southern U.S. market with more than 1 million square feet underway. Together, office development in these four markets accounted for close to 20% of the national development pipeline total at the start of November.

Northeastern Markets

Boston & Manhattan Dominate Asking Rates, Office Sales & Construction

In October, Manhattan, N.Y., had the highest listing rates in the region at roughly $68 per square foot, on average. Next, Boston was the second-priciest listing market in the Northeast with asking rates here averaging nearly $49 per square foot last month. At the same time, asking rents were nearly $32 per square foot for Philadelphia office space — the only Northeastern U.S. office market to ask less than the national average of $32.81 per square foot.

Looking at construction, Boston and Manhattan trade ranking places: The Massachusetts market remained in the lead for supply in the region as office projects in development here totaled nearly 4.7 million square feet last month. The Manhattan, N.Y., office space pipeline was the second-largest in the region in October with close to 3 million square feet under construction. Together, these two Northeastern U.S. markets accounted for nearly 23% of the national pipeline, totaling roughly 33.4 million square feet in October.

 

And, when considering office sales, the two largest markets in the region swapped positions yet again: Office sales in Manhattan since the start of the year added up to nearly $6.4 billion through October — the largest year-to-date sales total both in the region and in the country. During those 10 months, office properties here traded for an average of $523 per square foot. This was nearly triple the national average of $191 per square foot and placed the New York market comfortably ahead of the rest for priciest office market in the country.

At quite a distance, Boston and New Jersey had the second- and third-largest year-to-date sales totals, respectively, in the Northeastern U.S. region. Sales of Boston office space since the start of the year added up to nearly $1.2 billion and averaged $158 per square foot. Meanwhile, transactions of office space in New Jersey tallied $1.1 billion through October at an average sale price of $156 per square foot.

Office-Using Employment

Austin Boasts Largest 5-Year Boost in Share of Office Jobs in Local Employment

Even though the release of employment data from the Bureau of Labor Statistics was delayed for a second month due to the government shutdown, we can rely on private-sector employment research to fill in the gaps.

To that end, ADP data showed that employment in office-using sectors declined by a combined 21,000 jobs in September, led by losses in the information sector, as well as in professional and business services. At the same time, financial activities gained 11,000 jobs. So, considering labor data year-over-year, office-using sectors gained about 197,000 jobs, which marked a modest 0.6% increase in 12 months.

Lastly, metro-level labor data from January 2020 through August 2025 showed that nine of the top 20 U.S. markets saw increases in the percentages of jobs in office-using sectors. Among them, Austin, Texas, stood out for its 190-bps increase, which amounted to office-using jobs accounting for 30% out of total local employment. Otherwise, Orlando, Fla., and Miami saw the second- and third-highest boosts, respectively, followed by Dallas and Tampa, Fla.

Methodology

This report covers office buildings that are 25,000 square feet or larger. Listing rate and occupancy information was based on Yardi Research data.

Listing rates are full-service rates or “full-service equivalent” for spaces that were available as of the report period.

Vacancy refers to 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. For reporting purposes, A and A+/trophy buildings were combined.

Stages 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 CommercialCafe market boundaries.

Sales volume and price-per-square-foot calculations for portfolio transactions or those with unpublished dollar values were estimated using sales comps based on sales that were similar in terms of the market and submarket; use type; location and asset ratings; sale date; and property size.

Market boundaries in the CommercialCafe office report coincide with markets defined in the CommercialCafe Markets Map and may differ from regional boundaries defined by other sources.

Fair Use & Redistribution

We encourage and freely grant you permission to reuse, host, or repost the research, graphics, and images presented in this article. When doing so, we kindly ask that you credit our research by linking to CommercialCafe.com or this page so that your readers can learn more about this project, the research behind it, and its methodology. For more in-depth, customized data, please contact us at [email protected].