U.S. office vacancy hit a new high as commercial real estate’s subdued 2025 performance carried into the first quarter of 2026, according to a report from Moody’s Analytics.

Two markets in Texas and California led the increase in vacancy rates, with nearly 1M SF of office occupancy losses each.

The industry is navigating an “increasingly complex set of crosscurrents,” including renewed inflationary pressure, resilient high-income consumer spending and restrained office leasing demand that will likely keep CRE performance uneven in the near term, per Moody’s Analytics CRE Preliminary Trend Analysis for Q1 2026. 

The 21% office vacancy rate is up 10 basis points from the previous quarter and up 60 bps from the previous year. The new vacancy rate is 4% higher than the 17% vacancy rate recorded in 2020 at the start of the pandemic. 

Oakland-East Bay, California, led the U.S. in negative absorption with 944K SF of occupancy lost, according to the report. That was followed by Austin with 870K SF of negative absorption, then Chicago with 571K SF lost and San Jose, California, with 540K SF lost. 

Occupied office stock expanded during 2021 and 2022 as firms worked through pre-pandemic leases, but now 10 of the last 13 quarters have shown net contraction. The overall decline was 5.2M SF in the first quarter, bringing the decline since 2025’s first quarter to nearly 20M SF, the report states.

The trend reflects structural and cyclical forces, including the demand for higher-quality space and smaller footprints. Moody’s expects vacancy to continue rising this year as more leases expire.

Across all asset classes, Moody’s reports broadly stable performance. Multifamily rent growth remained modest, increasing less than 1%, amid a 10-bps increase in vacancy to 6.8%. Markets with the most aggressive construction pipelines, particularly Sun Belt markets like Dallas, Phoenix, Charlotte and San Antonio, saw increased vacancy rates. 

Retail “delivered mild upside surprises” with a flat vacancy rate of 10.4%. Strong consumer spending is helping but keeping the sector steady rather than spurring growth as labor markets soften and cost-of-living pressures increase.  

Industrial rents flattened as vacancy ticked up 10 bps to 8.4%, its highest level since 2021, as inventory growth narrowly outpaced occupancy gains. Industrial net absorption totaled 1.3M SF during the quarter. 

The 36-story 101 Marietta St. tower is for sale. The Atlanta Business Journal reports that real estate observers estimate that offers for the building will come in at about $67.5 million. The 675,000-square-foot building overlooks Centennial Yards. 

101 Marietta is owned by Dilweg Cos., which paid $68.8 million for the property in 2015. It tried to sell the building in 2020. At that time, it expected offers of more than $150 million. 

Downtown’s office vacancy rate remains over 30%, according to fourth-quarter 2024 data from CBRE.

Newmark’s Jay O’Meara, Justin Parsonnet and Ryan Reethof, along with CBRE’s Will Yowell, are marketing 101 Marietta for sale. 

The building is 62% leased. Its tenants include the Atlanta Hawks and coworking company Industrious. It also includes the offices for developer Centennial Yards Co. 

The Atlanta office market may have hit its nadir at the end of 2024, with a return of big lease signings giving hope that it may have finally turned a corner.

Vacancy in Atlanta’s office market hit a new high at the end of 2024.

Leasing activity hit 2.4M SF in the fourth quarter, an 18% jump from Q3, according to a CBRE report released Monday, led by AIG’s 179K SF regional hub lease at Perimeter Summit. At almost 10M SF, leasing activity in 2024 was the region’s highest in five years. 

Still, roughly 33% of Atlanta office space is available for lease, according to CBRE, a new record after tenants emptied out more than 2M SF last year. In West Midtown, nearly half of all office space is vacant.

But with more companies pushing employees back to the office and leasing activity on the rise, experts interviewed by Bisnow believe the office market is emerging from the gloom that has been cast over it for the past few years.

“I don’t see this as an all-of-a-sudden, hockey-stick sort of recovery. We’re still going to have to slog ourselves through. But we have finally hit the bottom,” Transwestern Chief Operating Officer Bruce Ford said. “We at least can have a vision and a forecast of increased absorption over the next two to three years as more companies get employees back to the office.”

Tenants signed 50% more deals last year for offices larger than 50K SF than they did in 2023, according to Colliers. Nearly two-thirds of all leases in the fourth quarter were new leases and expansions, according to CBRE, another positive sign for the market.

The second- and third-biggest leases in the fourth quarter were Eversheds Sutherland’s 94K SF lease at Bank of America Plaza and SouthState Corp.’s lease for 87K SF at Prominence Tower in Buckhead, respectively.

Activity appears to be carrying over into 2025, with the number of companies touring office spaces outpacing the national average in Metro Atlanta, according to Avison Young’s office Busyness index.

“We expect to see more larger deals in 2025 driven by new companies entering the market as well as return-to-office mandates being implemented,” Haley Leek, a market intelligence analyst with Avison Young, told Bisnow in an email.

T. Dallas Smith & Co. principal Cedric Matheny said companies are growing more confident about their office needs as they put pressure on employees to come back to their desks five days a week. 

JPMorgan Chase, Amazon, AT&T and UPS, all of which have Atlanta offices, will require employees to report to their workspaces five days a week this year.

“What we’re waiting on right now, and we’ll probably hear more at the end of this month, is the federal government,” Matheny said.

If President-elect Donald Trump follows through on his December announcement that he would require federal employees to report back to the office or fire them, it will give more momentum to the RTO movement in the corporate world, Matheny said.

“That may trigger some other companies and agencies to fall in line, which could affect the activity going forward,” he added.

Record Real Estate Partners Managing Partner Patrick Braswell said smaller companies are starting to take more office space as they require employees back more often and are less afraid that they will lose employees with RTO mandates. He said one of his clients increased its office size from 4K SF to 8K SF late last year in Nashville after implementing an RTO mandate to be able to fit all the workers under one roof. 

And while the availability and vacancy rate continue to climb, the pace has stabilized, sublease listings have fallen and construction activity has sunk to the lowest level since 2011. 

“I think we bottomed out six months ago,” CBRE Senior Vice President Jessica Doyle said. “But we need more big deal activity. There are a few big deals out there, but usually there’s more than a few.”

Doyle said she recently toured a company that was considering 150K SF offices in either Charlotte or Atlanta, a sign that perhaps the region is beginning to again flex its inbound activity mojo that it lost over the past couple of years. Atlanta was named the No. 3 city for headquarters relocations by Site Selection magazine this month.

Cushman & Wakefield Managing Principal Tyler Courtney said his firm is seeing an uptick in companies looking to open offices in Metro Atlanta, which could go a long way in helping tighten the office market, especially with newly delivered spaces.

According to Colliers, developers opened 2M SF of new office space last year, more than 80% of which remained without tenants by year’s end.

“[Corporate in-migration] was such an important part of the absorption story for Atlanta for so long, and it got really quiet. We’re starting to see that uptick a bit,” Courtney said. “If there’s one thing I’m watching this year, it’s that.”

The former St. Margaret’s Health Hospital in Spring Valley, Illinois, a shuttered 226,352-square-foot medical facility, has been listed for sale. In 2023, St. Margaret’s Health filed for Chapter 11 bankruptcy and SMP Health, which operated the hospital, said the hospital would close due to a host of challenges, including a cyberattack.

The five-story former hospital, located at 600 East 1st Street, features state-of-the-art medical facilities, including CT, x-ray, and MRI rooms. The property also has cardio and surgery suites, delivery and recovery rooms, an ICU ward, a 19-bed senior housing wing and a separate two-story medical office building and administrative offices.

Jamie Coté, vice president at Hilco Real Estate Sales, said, “The layout and infrastructure that this building has in place should lend itself well for conversion into similar healthcare or other institutional use. This may also create jobs and stimulate economic growth in the region, as leveraging the talent pool of this area will ensure high-quality workers are available for whatever use becomes of the property.”

A private local owner has hired Colliers Chicago’s capital markets team of Alissa Adler and John Homsher, CCIM, and the multifamily team of Tyler Hague and Lauren Stoliar, to market a 55,033-square-foot, mixed-use property at 1770 1st Street in Highland Park.

The building, which sits atop a 447-space public parking garage, features 17 apartment units and 36,000 square feet of medical office space, which are 100% and 61% leased, respectively. Tenants include Robb Orthodontics, Highland Park Maxillofacial & Implant Surgery, and Pediatric Dentistry of the North Shore.

Built in 1988, the development is directly across the street from the Highland Park Metra stop, near Highland Park Hospital and the town’s shopping district.

The team is also marketing 225 W. Superior Street, a three-story, 42,000-square-foot office property with underground parking and primed for multi-family redevelopment for sale. The single-tenant property is being sold vacant.

As part of the city’s efforts to eliminate “blight” and improve communities, the Detroit Construction & Demolition Department has demolished its 100th commercial property since January 2023. The long-vacant Charles Hanneman Elementary School located at 6420 McGraw, was the ceremonious 100th site.

The milestone marks progress in setting the stage for revitalization as Detroit aggressively tackles decaying buildings across the city’s landscape. Charles Hanneman was built in 1916 and was an active school for more than 90 years before it shuttered in 2007 due to financial issues.

“We look forward to seeing what this actual site will bring to the community,” said Eva Torres with the Detroit Department of Neighborhoods. Detroit has a list of hundreds of abandoned buildings slated for demolition. “The commercial properties range in categories and types – we do have a significant amount of schools on that list,” said Lajuan Counts from the Detroit Construction & Demolition Department.

Connect Industrial Midwest 2024 will take place on March 5, 2024, at Joe’s Live in Rosemont, Illinois. Click here for more information and to register.

While golf experienced a shot in the arm during the Covid pandemic, several clubs are facing the reality of the need to renovate their dated facilities. The Country Club of Gwinnett is scheduled to be sold at an online auction on March 20. Bidding is scheduled to begin March 18. The starting bid is $650,000, per the listing.

The Atlanta Business Chronicle reports the Country Club of Gwinnett will be sold on the Ten-X Commercial online auction platform. Terence Vanek of Leisure Investment Properties Group is the listing agent for the property.

The semi-private course, which covers more than 180 acres, has a full-service golf shop and practice facilities, including a driving range, putting green and practice bunker.

Other amenities at the club include the Grille Room restaurant in the clubhouse and a banquet facility that can accommodate up to 100 people for business and private events.

(Correction—The original story incorrectly stated that the course was closing. The course is open for business.)