Office Vacancy Drops to 17.8%, While Coworking Expands Across the U.S.

Key Takeaways

• National office vacancy fell to 17.8% in March
• Austin vacancy remains highest among major metros at 26.2%
• Office construction limited to 29M sq ft, 0.4% of stock
• Coworking inventory grew 16.5% to 164M sq ft
• Manhattan led 2026 office sales with $1.8B

Pulse Analysis

The modest dip in national office vacancy to 17.8% reflects a market still grappling with post‑pandemic work habits. Hybrid schedules keep physical occupancy around 55%, creating a gap between leased space and actual use. While most of the 25 largest metros posted lower vacancy, regional disparities persist—Austin’s vacancy remains the highest among major cities, and Western markets continue to command premium rents despite overall softness.

Supply dynamics are equally nuanced. Developers delivered just 4.3 million square feet in Q1, and new construction totals a modest 29 million square feet, representing only 0.4% of the existing inventory. Notably, medical office projects now comprise over a quarter of new starts, signaling a shift toward health‑care‑centric demand. Sales activity rebounded, with $12.8 billion across 549 transactions, yet discounting is widespread; Los Angeles saw more than half of deals below prior prices, and a Pasadena asset sold for roughly 32% less than its last sale.

Flexible workspaces are gaining traction as landlords adapt to hybrid work realities. Coworking inventory expanded 16.5% year‑over‑year to 164 million square feet, now accounting for 2.3% of total office stock. Traditional owners are integrating coworking‑style amenities—shared lounges, modular layouts, and service‑based offerings—to attract tenants seeking shorter leases and smaller footprints. This evolution creates fresh avenues for investors, especially in markets like Manhattan and Miami where demand remains robust, while also pressuring legacy office assets to innovate or face prolonged vacancy cycles.