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. 

Ahead of an expected round of tariffs on goods from China, Mexico and Canada, both the Port of Los Angeles and the Port of Long Beach experienced their busiest January on record. For the Port of Long Beach, January’s volume of 952,733 twenty-foot equivalent units also represented the second busiest month in its history.

The Port of LA began 2025 by moving 924,245 TEUs, up 8% from a year ago. Both San Pedro ports saw their second-busiest years on record in 2024, handling nearly 20 million TEUs combined, L.A. Business First reported.

“This January milestone adds to a great run of strong volume, with the last seven months averaging more than 927,000 container units,” said Port of LA executive director Gene Seroka. “A strong economy, along with importers bringing in cargo as a hedge against tariffs and ahead of Lunar New Year, were key factors in January.”

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.”

It’s bound to create a stir. With a per-square-foot listing price of more than $4,200, the sale of the Lucky Bastard Saloon property might set a new record. Besides being home to Lucky Bastard Saloon, the building is adjacent to Tootsies Lounge, The Stage on Broadway and Dierks Bentley’s Whiskey Row. The property is on the market for $66.5 million.

Deville Corp. owns the 15,608-square-foot retail building. It bought the property in 2005 for $2.35 million.

The Nashville Business Journal reports real estate on the entertainment strip is in high demand as tourism continues to surge, with properties typically selling for thousands of dollars per square foot.

The Ernest Tubb Record Shop, at 417 Broadway, sold for about $2,000 per square foot in August 2022, and 400 Broadway, home to Dierks Bentley’s Whiskey Row, sold for around $2,400 per square foot in May 2022.

Glen Kunofsky and Christopher Urban, of New York-based NNN Pro Group, are marketing the building.

December student housing preleasing for the 2024-2025 academic year set a new record at 47.3%, up 9% from a year ago, according to the latest Yardi Matrix National Student Housing Report. Asking rates also continued to climb, hitting $858 per bed in December and marking a 4.9 percent increase on a year-over-year basis.

The exceptional preleasing indicates a high renewal rate, according to Yardi Matrix, with 51 markets boasting a 50% rate in December and 10 schools already at least 75% preleased. Rent growth inched downward, falling from 6.4% earlier in the leasing cycle to 4.9% in December 2023.

“Many of the markets with the fastest preleasing are seeing the strongest rent growth as operators take advantage of the surge in demand,” according to the report. “Twenty-seven schools with over 10% rent growth in December are, on average, five percent ahead of preleasing last year.”

Conversely, student housing investment is in line with current trends across the real estate industry, as high interest rates continue to impact sales. According to preliminary data, just 73 student housing properties changed hands in 2023 across the Yardi 200, compared to an average of 205 properties sold in 2021 and 2022.

Pictured: James Madison University in Harrisonburg, VA, which saw the fastest year-over-year preleasing growth in the Yardi 200. Photo by Ben Schumin/Wikipedia.