Office Report September 2023

Office Vacancy Rates Continue to Rise Despite Return-to-Office Mandates 

Key Takeaways: 

  • The average U.S. office listing rate stood at $37.83 per square foot, down 2.2% year-over-year 
  • Up 260 basis points year-over-year, the national vacancy rate reached 17.5% at the end of August 
  • There was 108 million square feet of office space under construction, accounting for 1.6% of existing stock 
  • Office sales totaled $20.5 billion in the first eight months of the year, with assets trading at $193 per square foot 
  • Vacancy rates continued to soar in the West, rising 590 basis points in Seattle and 510 basis points in San Francisco 
  • At $106 per square foot, Chicago’s average sales price remained the lowest among leading office markets 
  • With properties trading at $379 per square foot, Austin recorded the highest average sales price in the South 
  • Manhattan asking rents fell nearly 2% but remained highest in the nation at $69.58 per square foot 

Despite the prevalence of remote and hybrid work arrangements coupled with the pandemic-induced decline in office usage, our latest U.S. office market report confirms that return-to-office trends persist well into 2023. Since the health crisis was declared over in May, several large firms are now requiring their employees to come back to the office this year. 

After saying last year that the company had no plans to mandate employees returning to the office, Amazon CEO Andy Jassy reversed course in May, announcing three days a week in the office policy. BlackRock and Disney are mandating four days a week within the office. Google, which announced a three-days-per-week policy last year, told employees that attendance will be a metric in performance reviews. Meta is beginning to mandate three days a week in the office this month and is no longer mentioning hybrid work in job listings.  

One of the most impactful return-to-office mandates could soon arrive from the federal government, potentially boosting the Washington D.C. market, which consistently sees below-average office utilization in Kastle’s Back-to-Work Barometer. 

Even as some form of hybrid work becomes ingrained and accepted, the lack of overall physical office usage continues to push tenants to smaller footprints. More folks being in the office year-over-year is still not comparable to what usage was pre-COVID-19. Vacancy rates are rising as leases expire.

Peter Kolaczynski, CommercialEdge Senior Manager

However, office workers remain resistant to returning to the office for various reasons, but commuting time looms as perhaps the biggest drawback. Many people are unwilling to give up that extra time they have become accustomed to each day. A higher unemployment rate could give firms leverage in return-to-office conversations, but remote work is here to stay. 

Open-office floor plans that dominated the pre-COVID-19 workplace are out of line with the current needs of office workers and are particularly ill-suited for Zoom meetings, which will continue to be around. Organizations will need to adapt workspaces to the post-pandemic world if they want to entice workers to come in. Amenities may help, but designing workspaces where people feel they can be productive will be equally important. Since teams concentrate meetings on in-office days, a variety of different-sized meeting rooms will be necessary. Offices will also need more enclosed spaces for focus time or privacy for video calls, according to office real estate outlooks. 

Listing Rates and Vacancy: Vacancies Continue to Surge in Tech-Heavy Metros 

The national average full-service equivalent listing rate for office space was $37.83 in August, according to our latest U.S. office market report. That represented a decrease of 2.2% over the year and six cents over the month. 

Top Listings by Metro Area: August 2023 

At the same time, the national vacancy rate was 17.5%, an increase of 260 basis points year-over-year. Nearly 20 out of the top 25 markets recorded an uptick in vacancies over the previous year. 

Seattle led with a 590-basis-point increase in U.S. office vacancy rates, sitting at 22% at the end of August. San Francisco was in a similar position, with vacancies rising 510 basis points year-over-year to 23.2%. Similarly, on the East Coast, Manhattan recorded a 330-basis-point uptick in the last year, albeit recent leases have provided slivers of hope for the beleaguered market. 

Supply: Around 40% of Under-Construction Pipeline Started in 2020 or 2021 

Nationally, there were 108.4 million square feet of office space under construction at the end of August, accounting for 1.6% of total stock. The pipeline can represent past years’ trends more than current demand. Roughly 40% of stock currently under construction started in 2020 or 2021, likely with planning phases that predated the pandemic. 

Office Space Under Construction (Million Sq. Ft.) 

Boston continued to have the largest development pipeline in the nation, with nearly 14 million square feet of space underway, equal to 5.7% of existing inventory. However, developers broke ground on only 996,000 square feet so far this year, representing 7% of the new supply pipeline.  

Transactions: Sale Price for Class A Buildings Falls 35% Compared to Year-Ago Figures 

The U.S. office market recorded $20.5 billion in sales through the end of August, with properties trading at an average of $193 per square foot. 

The sale prices for top-tier properties have significantly dropped. In 2022, buildings rated as A+ or A were sold at $361 per square foot, but this year, the price fell to $233 per foot, marking a 35% decrease. Interestingly, this drop is steeper than the decline observed between 2008 and 2009 for A+/A buildings. On the other hand, Class B properties have only experienced a 9% decrease in their average sale price this year. 

2023 Year-to-Date Sales (Millions) 

Western Markets: Seattle Vacancies Continue to Surge, Rising 590 Bps Year-over-Year 

Tech markets in the West continued to record some of the highest U.S. office vacancy rates in the nation as remote work and hybrid setups continue to prevail. In August, San Francisco’s vacancy rate stood at 23.2%, increasing 510 basis points year-over-year, the highest rate in the region and the second highest nationwide. 

Seattle also continued to experience substantial vacancy rate hikes, coming in at 22%, up 590 basis points over the past 12 months, registering the most significant year-over-year increase across the country’s leading office markets. The tech sector’s pullback hit Seattle hard over the past year, with Amazon, Microsoft and Zillow being some of the companies with major layoffs. Nonetheless, Amazon’s commitment to occupy two downtown Bellevue towers this year and its recent return-to-office policy might reverse some of the negative impacts caused by the pullback, office real estate outlooks estimate. 

West Regional Highlights 

Despite the low office occupancy rates, San Francisco remained the priciest market in the West with asking rents at $65.45 per square foot, followed by the Bay Area at an average of $55.91 per square foot. In contrast, the lowest listing rates in the region were recorded in Phoenix ($27.81 per square foot) and Portland ($28.07 per square foot), below the $37.83 national average. Meanwhile, Seattle saw rates in line with the national figure, coming in at $37.96 per square foot, based on our latest U.S. office market report. 

The Emerald City also had the largest development pipeline in terms of square footage in the region, totaling 7.2 million square feet of space under construction as of August. This accounts for 5.2% of existing stock. However, only 266,000 square feet of office space broke ground this year, indicating that most of the pipeline represents past years' trends rather than current demand. 

Sales activity also remained more moderate in markets in the Pacific Northwest, with Seattle’s $93 million and Portland’s $107 million being the second- and third-lowest sales volumes among the top 25 office markets in the U.S. Meanwhile, Los Angeles claimed the top spot, with $1.2 billion in closed office deals year-to-date through August. Phoenix and Denver followed with $770 million and $703 million in sales, respectively.  

In terms of sale prices, San Diego ($408 per square foot), San Francisco ($373 per square foot) and the Bay Area ($356 per square foot) led the West. 

Midwestern Markets: Despite Muted Sales Activity, Chicago Records Nearly $700 Million in Closed Office Deals 

While Chicago continued to post the lowest year-to-date sale price per square foot among the nation’s top 25 office markets, at just $106 per square foot, the metro amassed $686 million in office transactions. Nonetheless, this is well below the $2.49 billion sales volume Chicago recorded over the first eight months of 2022 when properties traded at an average price of $189 per square foot. 

Midwest Regional Highlights 

While sales activity also slowed in the Twin Cities, with $430 million in sales this year compared to the $787 million in 2022, the year-to-date average sale price surged $92 compared to year-ago figures, increasing to $223 per square foot. The Minneapolis – St. Paul market’s sales volume was slightly below San Francisco’s $505 million and just above Miami’s $408 million. 

The Midwest’s leading metros remained the most affordable among the 25 largest U.S. office markets. In August, asking rents in Chicago stood at $28.18 per square foot, well below the $37.83 national average. At the same time, Minneapolis-St. Paul ended the month at $26.62 per square foot, exceeding only Orlando’s $24.31 per square foot rate. 

Chicago and the Twin Cities also continued to have two of the five lowest construction pipelines on a percentage-of-stock basis at 0.8% and 0.5%, respectively. In terms of square footage, Chicago had 2.4 million square feet of office space under development as of August, while the Twin Cities had just 546,369 square feet in the pipeline. 

Southern Markets: Washington, D.C. Leads the South with $940M in Sales  

Miami remained the most expensive office market in the southern region, with average rates at $46.14 per square foot. Austin and Washington, D.C., also recorded higher rates ranging in the $40s, above the national average of $37.83 per square foot. Conversely, Tampa ($28.13), Dallas ($27.39) and Orlando ($24.31) had much lower rental rates, with the latter having the lowest among the top 25 office markets in the U.S. 

While U.S. office vacancy rates continued to rise in most markets in the South, only four of the 10 leading markets in the region recorded rates above the 17.5% national average. Nonetheless, the South still claimed the nation’s highest vacancy rate, with Houston’s rate hovering above 25%. Austin also registered rates above 20%, while Atlanta and Dallas–Fort Worth stood at 18.7% and 18.5%, respectively. 

South Regional Highlights 

Regarding sales activity, Washington, D.C., claimed the top spot among leading southern markets, with office transactions totaling $940 million and assets trading at an average of $206 per square foot year-to-date through August. Houston followed with $865 million in office sales at an average of $123 per square foot. Regarding average sale prices, Austin led with $379 per square foot and Miami followed with a price per square foot of $251. 

Office development continued at a faster pace in Austin, with more than 6 million square feet of space under construction, accounting for 6.7% of total inventory — the largest pipeline nationwide on a percentage-of-stock basis. In contrast, Tampa had the smallest pipeline, with only 445,154 square feet under development. 

Northeastern Markets: Manhattan Listing Rates Fall Nearly 2% Year-Over-Year 

Manhattan remained the priciest market for office rents in August, closing the month at an average of $69.58 per square foot. While still claiming the top spot nationwide, rents in the market fell nearly 2% compared to year-ago figures. Manhattan’s vacancy rate has also increased 330 basis points in the last year and more than doubled since the onset of the pandemic. 

Still, some recent leases and renewals have provided slivers of hope for Manhattan: Davis Polk signed a 700,000-square-foot, 25-year lease extension at 450 Lexington Ave. At the same time, Amazon renewed a 210,000-square-foot lease at 1440 Broadway and signed a new one for 90,000 square feet at 75 Rockefeller. 

Northeast Regional Highlights 

Manhattan also saw the largest sales volume and the highest average sale price across the U.S., with $1.5 billion in office transactions and properties trading at $586 per square foot. Boston followed with $1.3 billion in closed office deals at an average of $323 per square foot. New Jersey’s sales volume also hit the $1 billion mark, whereas Philadelphia recorded $565 million in closed office deals. 

Despite the national slowdown in development, Boston had nearly 14 million square feet of office space under construction, equal to 5.7% of existing stock as of August. Manhattan followed with 6.5 million square feet, accounting for 1.4% of existing inventory. On the other end of the spectrum, Brooklyn had the smallest pipeline, with nearly 1.2 million square feet of space under development. 

Office-Using Employment: Robust Growth in Dallas 

Office-using sectors of the labor market added 8,000 jobs in the month of August, the first month since April that the three sectors combined added workers. 

Dallas has led the nation in office-using employment growth for most of 2023. Dallas has been ranked third for year-over-year growth every month and has lapped the field in absolute job gains among top markets covered by CommercialEdge. July data, which trails the national release, showed office-using sectors in Dallas growing 4.9% year-over-year, according to the Bureau of Labor Statistics. 

Southern Markets Dominate Office-Using Employment Growth 

Moreover, Dallas has added nearly 60,000 office jobs in the last 12 months, double the amount that second place Boston has added (29,400), and has accounted for 15% of all office jobs during that timeframe nationwide. While most of the growth has been in the Professional and Businesses Service sector (37,600 jobs added in the last 12 months), Financial Activities (18,100) and Information (4,200) have seen solid gains as well. 

Download the PDF report to view more, including the map for office-using employment growth.

You can also see our previous office reports. 


This report covers office buildings 25,000 square feet and above. CommercialEdge subscribers have access to more than 14,000,000 property records and 300,000 listings for a continually growing list of markets.  

CommercialEdge collects listing rate and occupancy data using proprietary methods.  

Listing Rates — Listing Rates are full-service rates or “full-service equivalent” for spaces that were available as of the report period. CommercialEdge uses aggregated and anonymized expense data to create full-service equivalent rates from triple-net and modified gross listings. Expense data is available to CommercialEdge subscribers. National average listing rate is for the top 50 markets covered by CommercialEdge.  

Vacancy — 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.  

A and A+/Trophy buildings have been combined for reporting purposes.  

Stage 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 CommercialEdge market boundaries.  

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

Year-to-date metrics and data include the time period between January 1 of the current year through the month prior to publishing the report.    

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

Evelyn is a creative writer covering commercial real estate trends and insights in the U.S. Evelyn was previously a senior associate editor at Multi-Housing News and Commercial Property Executive. She has an academic background in Journalism and Irish Studies. Evelyn has been covering the CRE industry since 2017. Reach her via email.

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