04Apr_CEdge_Office Report

Q1 2024 Office Sales Dip to $5.4 Billion, 17% Below Last Year’s Figure

Key Takeaways: 

  • The average U.S. office listing rate stood at $37.74 in March, falling 1.3% year-over-year
  • Up 120 basis points year-over-year, the national office vacancy rate rested at 18.2%
  • Under-construction office space totaled 87.9 million square feet at the end of the month, of which only 2.8 million broke ground this year
  • Office sales stood at $5.4 billion in the first three months of 2024, with assets trading at $171 per square foot
  • San Francisco reached the second-highest vacancy rate nationwide, with 24.2%
  • Leading office markets in the Midwest logged a total of $355 million in office sales through March
  • Washington, D.C., led the U.S. in sales, with transactions totaling $999 million through the first three months of the year
  • Boston’s under-construction pipeline accounted for more than 15% of the national stock currently underway

The geographic makeup of coworking space is becoming more suburban, according to the latest U.S. office market report. In the past year, the amount of flex space tracked by our database has grown to 124.8 million square feet from 113.5 million, and nearly all of that growth has been in suburban submarkets.

Suburban coworking space has increased by nearly 9 million square feet during that time, compared to only 400,000 square feet in urban areas.

Suburban submarkets now account for nearly as much space as their urban counterparts. The suburban share of national flex space has increased by 3 percentage points to 47% in the 12 months ending in March, while the share in urban submarkets has shrunk to 48% from 52%.

Coworking operators are bringing the office to the worker rather than waiting for the worker to commute to them by adding significant space closer to where people live in the suburbs.

Peter Kolaczynski, DirectorCommercialEdge

Coworking’s shift to the suburbs is even more striking without Manhattan, the urban market with the largest amount of flex space. With Manhattan excluded, the suburbs’ share of national coworking space is 52%. Some of the coworking space tracked by our database lacks submarket classification, which is why the sum of urban and suburban shares does not equal 100%. However, because most unclassified spaces are in smaller markets, we believe the majority are within suburbs. We continuously revise our tracking of these spaces and will provide updates in future reports.

What’s behind the shift to the suburbs? Companies that embrace remote and hybrid work are recognizing the need to provide a place for in-office collaboration, training and deep focus. Many firms have eschewed traditional office leases and instead are choosing coworking to fulfill this need. With the workforce increasingly decentralized, firms are leasing suburban flex space to accommodate workers closer to their homes.

It’s unclear whether the suburbs will continue to dominate growth in flex space. Although central business districts are still facing an uphill battle to regain their pre-pandemic prominence and vibrancy, city centers can offer amenities and transportation options that many suburbs cannot match. We expect vibrant city centers with mixed real estate uses to attract more coworking tenants in the long run. Cities that contain primarily office towers and few amenities in their downtowns will struggle to fill flex spaces, according to our office real estate outlook.

Listing Rates and Vacancy: U.S. Vacancy Rate Rise Widespread

The national average full-service equivalent listing rate was $37.74 per square foot in March, a decrease of nine cents from the previous month and 1.3% year-over-year.

Top Listings by Metro Area: March 2024

The national vacancy rate was 18.2%, an increase of 120 basis points year-over-year. U.S. office vacancy rates have increased in recent years as companies embrace remote and hybrid work and re-examine their office footprints. The increases are not concentrated in just one market or sector, either.

Vacancy rates in tech markets have risen steeply. In San Francisco, the vacancy rate has grown by 510 basis points (bps) over the last 12 months. Bay Area vacancies have risen 350 basis points, and Seattle’s have grown 390 basis points. Dallas (510 bps) and Charlotte (310 bps), markets with a high concentration of finance jobs, have also seen increases. Even Boston, an in-demand life science hub, has seen rates grow 290 bps in the last year.

Supply: Office Development Hits the Brakes

Nationally, 87.9 million square feet of office space was under construction as of March, representing 1.3% of stock, our U.S. office market report reveals.

The under-construction pipeline has shrunk by nearly 40% in the last two years, and it looks like it will only continue to shrink. Office starts averaged nearly 64 million square feet a year between 2020 and 2022 before falling to 44.1 million square feet last year.

Office Space Under Construction (Million Sq. Ft.)

Through the first quarter of 2024, only 2.8 million square feet of office starts were logged. While a lag in collecting some data means that this number is incomplete, it still indicates a massive drop-off in office development. Falling office demand, increasing capital costs and tightening standards for construction loans converged to slow development.

Of the office stock currently under construction, the vast majority is located in top markets. The largest development market, Boston, has more than 15% of national under-construction stock alone. The top 10 markets account for 56% of under-construction square footage, while more than 80% of space underway is in the top 20 markets.

Transactions: Office Sales Activity Continue to Wane in 2024

Nationwide, a total of $5.4 billion in transactions have been logged year-to-date through March, with properties trading at an average of $171 per foot. This figure is 17% lower than the $6.5 billion recorded during the same period last year and 70% below the $18.9 billion logged in 2022, our U.S. office market report shows.

2024 Year-to-Date Sales (Millions)

At the market level, Washington, D.C., recorded the largest sales volume year-to-date through March, totaling $999 million, with properties trading at $463 per square foot. This figure is more than double the next-largest sales volume recorded in the Bay Area, which totaled $404 million and is nearly four times higher than the $257 million traded in Dallas through the first three months of the year.

Western Markets: San Francisco Continues to Lead in Office Availability with Vacancy Rates at 24.2%

Among Western markets, the Bay Area had the largest sales volume, closing $404 million over the first quarter of the year. San Diego and Phoenix had the second-largest volumes in the region, both recording $159 million in sales.

Meanwhile, sales activity in Los Angeles, which had the highest sales volume during the same period last year, continued to lag. Year-to-date through March, the metro closed $131 million in office deals, marking a 62% decrease compared to last year's figures.

West Regional Highlights

Similarly, San Francisco, which ranked second in sales volume among Western markets last year, saw a significant decline this year, with only $73 million in transactions recorded in the first quarter, compared to the $316 million during the same period last year.

Following trends seen in the previous quarters, U.S. office vacancy rates across the West’s leading markets continued to climb. San Francisco recorded the highest availability in the region at 24.2%, outpaced only by Detroit’s 32.1% rate on a national level. Denver and Seattle followed, with office vacancy rates at 22.7% and 22.6%, respectively.

Leasing activity in San Francisco has been driven by AI companies, with nearly 1 million square feet of leases inked over the past two years. However, most AI leases involved subleased space shed by other tech companies, such as Slack, Uber and Octa, Globe Street reported. At the end of the first quarter of 2024, sublease space accounted for 6.3% of total space available in San Francisco, with tech companies, such as Meta and Yelp, driving up availability.

Even amid tech woes, San Francisco maintained its position as the most expensive office market in the West, with an average asking rent of $60.81 per square foot. At the end of March, Sand Hill Commons in Menlo Park was the highest-priced listing, offering spaces at $204 per square foot.

The Bay Area had the second-highest asking rents in the West, coming in at $52.70 per square foot. On a national level, only Manhattan exceeded the Northern California markets, with asking rents at $71.30 per square foot. Overall, in the West, Denver ($30.24 per square foot), Portland ($27.84 per square foot), and Phoenix ($27.60 per square foot) were the only markets with rates below the national average of $37.74 per square foot.

In terms of construction, San Francisco took the lead with 5.3 million square feet of office space in the pipeline, accounting for 3.3% of its existing stock. Office construction in the metro, however, is mostly driven by the life science sector. Another life science hub, San Diego, had the second-largest office development pipeline in the region, with 3.9 million square feet of space underway, equal to 4.0 % of existing inventory.

Midwestern Markets: The Twin Cities Leads Midwest in Sales at the End of Q1

Markets in the Midwest continued to see some of the slowest office fundamentals among the top 25 markets across the U.S., with high U.S. office vacancy rates and asking rents below the national average. Detroit recorded the highest office vacancy rates in the U.S., at 32.10% at the end of March. Chicago followed, with vacancies at 19%, meanwhile Minneapolis-St. Paul came in at 17.9%, just below the 18.2% national rate.

In March, asking rents in Detroit stood at $22.36 per square foot — the lowest rate among the top 25 U.S. office markets. At the same time, the Twin Cities closed the first quarter of 2024 at $25.80 per square foot, while Chicago rents stood at $28.68 per square foot, $9.06 per square foot below the national rate.

Midwest Regional Highlights

Regarding construction activity, the Twin Cities had the smallest supply pipeline nationwide, consisting of only 136,166 square feet of office space under construction, equal to 0.1% of the metro’s existing inventory. At the same time, the metro saw its coworking inventory increase by 13% quarter-over-quarter, going from 85 spaces in Q4 2023 to 96 in Q1 2024, according to a recent report by CoworkingCafe.

Detroit had the next-smallest construction pipeline in the region, with 524,000 square feet underway, making up 0.4% of its total stock. On the other hand, Chicago had the largest development pipeline in the Midwest, with 1.7 million square feet under development, accounting for 0.6% of the existing stock.

Over the first quarter of 2024, the leading office markets in the Midwest logged a total of $355 million in office sales. Minneapolis-St. Paul recorded the highest volume in the region and the sixth-highest nationwide, totaling $177 million, with properties trading at an average of $163 per square foot. Chicago was slightly behind, with $152 million in closed office transactions at $92 per square foot. At the other end of the spectrum stood Detroit, with $27 million in sales, closed at an average of $64 per square foot.

Southern Markets: Washington, D.C., Logs Largest Sales Volume in the U.S. at $999 Million

In the first quarter of 2024, Washington D.C., led the U.S. in office sales, with closed deals amounting to $999 million at an average of $463 per square foot. Within city limits, the biggest office sale of the year so far was PRP Real Estate Investment’s acquisition of Market Square, a two-building office complex in the heart of D.C., for $323 million.

The seller, Columbia Property Trust, purchased the property in 2011 for $611 million, or $905 per square foot. Despite the significant discount, the deal was the largest in D.C. since the summer of 2022, when Japanese investor Mori Trust Co. paid $531 million for 601 Massachusetts Ave. NW., according to The Real Deal.

Dallas-Fort Worth recorded the next-largest sales volume in the South and the third-largest nationwide, totaling $257 million year-to-date through March. Sales activity has slowed significantly in the metro over the past year: After logging more than $11 billion in transactions between 2021 and 2022, Dallas-Fort Worth saw only $1.4 billion in office deals last year. The average sale price has also declined in the metro, falling from $233 per square foot in 2022 to $144 per square foot in 2023 and $123 per square foot in the first quarter of 2024.

South Regional Highlights

Although Austin and Nashville had the largest construction pipelines in the South on a percentage-of-stock basis (4.6% of their stock underway), Dallas-Fort Worth led development in the region in terms of square footage, with more than 5.1 million square feet underway.

Dallas-Fort Worth has also emerged as a frontrunner in coworking expansion. According to CoworkingCafe, by the end of the first quarter of 2024, the market had 259 coworking spaces, 10 more than the previous quarter, ranking third in the nation behind Manhattan (263) and Los Angeles (270).

Regarding asking rents, Miami remained the priciest market in the South, closing March at $49.05 per square foot. Austin and Washington, D.C., also posted rates in the $40 range, exceeding the $37.74 per square foot national average. At the bottom of the list stood Tampa ($28.62), Orlando ($24.44) and Dallas-Fort Worth ($29.08).

The Texas metros recorded the highest vacancy rates in the region, with Houston leading at 23.5%, followed by Austin at 22.0% and Dallas-Fort Worth at 21.6%.

Northeastern Markets: Boston Construction Pipeline Accounts for More Than 15% of National Stock Underway

Manhattan remained the priciest among the leading U.S. office markets, with asking rates at $70.31 per square foot, despite a 390-basis-point price decrease year-over-year. In contrast, Philadelphia registered the lowest rates in the Northeast, coming in at $31.85 per square foot, below the national average of $37.74 per square foot.

In terms of sales, New Jersey took the lead in the region, closing a total of $215 million in office deals year-to-date through March, at an average of $100 per square foot. Boston followed, with $207 million in office transactions at $153 per square foot.

Northeast Regional Highlights

Meanwhile, Manhattan logged only $73 million in office sales through the first quarter of the year — the same amount as San Francisco — and well below the $417 million recorded during the same period last year. Philadelphia saw $58 million in office transactions through March, at an average sale price of $94 per square foot.

As the largest life science hub in the country, Boston continued to lead the nation in office development at the end of the first quarter, representing more than 15% of the national stock underway. The metro had a total of 13.9 million square feet of office space under construction, accounting for 5.6% of its existing inventory, with an additional 5.1% in the planning stages. Regarding square footage, Manhattan had the next-largest pipeline in the Northeast, with 3.2 million underway, accounting for 0.7% of the market’s total stock.

Northeast Regional Highlights

Office-Using Employment: Artificial Intelligence to Impact Office Leasing

Office-using sectors of the labor market added 10,000 jobs in the month of March. Of these, 7,000 were in professional and business services and 3,000 in the financial activities sector. The information sector was unchanged from February. Office-using employment has grown 0.6% year-over-year.

The slowdown in office employment growth is a blow to a sector striving to recover demand lost to remote and hybrid work.

Office Using Employment

Artificial intelligence looms as a new threat. While the technology is not yet replacing large numbers of office workers, some firms are looking to supplement existing staff with AI instead of hiring new employees.

However, AI will also drive office demand in certain places, office real estate outlooks indicate. In tech markets that were particularly hard hit by the pandemic, AI firms, both large and small, are ramping up leasing activity as the sector grows rapidly. JLL reported that 25% of leasing activity in San Francisco last year was for AI tenants.

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 oth

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.

Recent Reports

commercialedge industrial market report june

Industrial Valuations Rise Amid Normalizing Demand and Muted Transaction Volume

Industrial valuations are rising despite market shifts, with the U.S. average sale price reaching $142 per square foot as of May.

commercialedge office market report

Sales Activity Remains Slow as Discounted Office Sales Jump to 30% 

As of May this year, there have been 600 office sales, an increasing number of which are being sold at discounts.

May U.S. Industrial Market Report

Industrial Vacancies Normalize as High Inflation and Costs Slow Demand

The U.S. industrial vacancy rate was 5.2% at the end of April, unchanged month-over-month as demand for space has been moderating.