It’s not just New York and California — the office market is getting healthier across the country.

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National office vacancy rates declined 10 basis points in the second quarter, with more than half of the 92 markets tracked by Cushman & Wakefield notching a dip in vacancy rates. The second-quarter results reinforced an uptick at the start of the year that has been building despite macroeconomic volatility. 

Vacancy has declined for two consecutive quarters as tenants fill the highest-quality buildings, leading some demand to trickle into the Class-A tier as the worst office space is being taken out of commission, with more than 90,000 apartments in the office-to-residential conversion pipeline. 

“The first half of 2026 reinforced that the office recovery is no longer confined to a handful of leading markets or trophy assets,” David Smith, the head of Americas insights at Cushman & Wakefield, said in a statement. 

Vacancy declined in 49 of the 92 markets tracked by Cushman, or 53% of cities. Tech firms building artificial intelligence tools continue to drive leasing activity, and the best-performing markets continue to be tech-centric hubs. San Francisco, Orange County and Midtown Manhattan recorded the largest year-over-year declines in vacancy, according to Cushman.

Other areas around New York City are well represented in the top 20 markets for vacancy declines, joined by secondary markets including Kansas City, Missouri; Charlotte; Jacksonville, Florida; Austin; and others. Many of the markets are bouncing back from cyclical vacancy highs, with San Francisco gaining 364 basis points of occupancy but leaving overall vacancy elevated at 30%. 

The wide representation of markets seeing vacancy dips suggests that office leasing activity is more broad-based and not solely reliant with tech tenants.

Total U.S. office inventory also contracted by 33M SF over the past five quarters, and 20 markets have had at least 1% of their office space taken off the market, as more conversions are proposed. 

Among markets moving in the other direction, vacancy climbed the most year-over-year in Cleveland, although the city’s vacancy rate is below the national average of 20.1%.

Boston, Oklahoma City, Puget Sound’s Eastside outside Seattle and Los Angeles’ central business district round out the five markets where vacancy has grown the most year-over-year. Boston’s vacancy rate is still below the national average, and neighborhoods outside Downtown Los Angeles have seen vacancy plateau over the last three quarters.

Tenants vacated a net 300K SF of space during the second quarter, but absorption for the rolling 12 quarters totaled 14.3M SF after revisions to previous quarters’ totals pushed move-ins higher and suggest that this quarter’s total could also shift upward.

Sublease availability has also declined 15% year-over-year to 96M SF, its lowest point since early 2021, and continuing a downward trend that Cushman says historically precedes a broader market recovery. 

More conversions will be announced, helping support gradual occupancy improvement across the sector as it benefits from healthier supply-side dynamics, Smith said. 

Austin is leading all U.S. cities in office-using employment growth, even though its office vacancy rate remains well above the national average.

The Sun Belt filled the top five spots in office-use employment, which included Raleigh, North Carolina, Nashville, Dallas and Charlotte, according to a recent Avison Young report. Between 2019 and 2025, Austin’s office-using employment grew by roughly 34%. Raleigh saw the second-highest growth at approximately 23%. 

Avison Young attributed the trend to healthier demand and elevated leasing activity.

But despite job growth, Austin posted a 22.4% office vacancy rate in the first quarter, according to Colliers. This rate has remained flat year-over-year, with Q1 2025 reporting a 22.5% vacancy rate. The national average was 18.6% during the first quarter of 2026, CBRE reported.

However, there is hope on the horizon. With Austin leading the nation in office-use growth, the metro area’s vacancy rate is likely to gradually decline, Avison Young’s Regional Manager of Market Intelligence Ariel Guerrero told Bisnow. 

“With Austin’s office development pipeline now slowing significantly and the metro still leading the nation in office-using job growth, vacancy has likely peaked and should gradually trend downward over the next year,” he said.

Since 2020, nearly 14M SF of new office space has been delivered, causing a sharp oversupply, as noted by Cushman & Wakefield.

New office construction has slowed significantly as the market works through that oversupply. The pipeline had only 756K SF expected to be fully delivered by the end of the third quarter, according to a separate CBRE report. 

Additionally, Austin is reported to have positive net absorption in Q1, with 110 tenants seeking 4.4M SF of space, CBRE stated. The metro’s improving office demand mirrors the broader national trend, which CBRE reported as the eighth straight quarter of positive demand.

Guerrero said the expected decline in the vacancy rate likely won’t be uniform across all office building classes, at least not in the near term. Trophy and Class-A assets will see rates decline before what he described as “older vintage buildings.”

“In the meantime, it remains a tenant-favorable market, presenting a window for occupiers to secure long-term leases before conditions tighten and pricing power begins to shift back toward landlords,” he said.

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. 

Every year, Atlanta’s industrial real estate seems to break new records in terms of activity and rents, evidence of the never-ending demand for warehouse space in the Southeast’s primary logistics hub.

But even by those high standards, 2021 blew previous years out of the water. 

Surging demand has some developers struggling to keep up new warehouse supply in Atlanta.

Companies absorbed 42.2M SF of Metro Atlanta industrial space last year, smashing the previous record for positive absorption of 25.9M SF set in 2017, according to new Colliers data provided to Bisnow. The region’s industrial vacancy hit an all-time low of 3.4% to close out 2021, compared to 6.2% at the end of 2020.

“I believe we’ve likely reached the lowest vacancy level we will have in 2021 … maybe ever. I expect we will see levels increase this year, however not to the point where we have a supply problem,” Colliers Director of Research Scott Amoson said in an email. “I feel like the market is just responding to demand and trying to get back in balance.”

Six industrial deals larger than 1M SF were signed last year. Cereal maker Kellogg’s secured the largest industrial deal of the year with a nearly 1.4M SF build-to-suit developed by Prologis at 139 Orchard Business Parkway in Newnan, according to Colliers. 

Industrial tenants signed more than 80M SF of leases overall in 2021, according to King Industrial. 

“I do not see the momentum slowing down anytime soon,” King Industrial President Sim Doughtie told Bisnow in an email.

The demand has pushed rents up to record levels in Metro Atlanta. Rents have steadily increased over the past decade, from $3.40 per SF in 2012 to more than $5.30 per SF at the end of 2021, according to Marcus & Millichap.

Amazon secured the second- and fourth-largest leases of the year with its 1.15M SF deal at Majestic Airport Center V in Union City, 7.5 miles from Hartsfield-Jackson Atlanta International Airport, and the 1.1M SF deal with IDI Logistics at Northwest 75 Logistics Center in Cartersville, according to King Industrial.

The third-biggest deal came when Ace Hardware agreed to lease a 1.12M SF build-to-suit distribution center from Trammell Crow in Jackson County, more than 60 miles north of Atlanta, according to Colliers.

Other million-foot deals included XPO Logistics leasing 1.04M SF for aircraft giant Boeing at 2145 Anvil Block Road in Forest Park and CJ Logistics USA taking a 1M SF lease at CRG’s Locust Grove Distribution Center 100 in Henry County.

For the past seven years, developers have unleashed 170M SF of new warehouse and distribution space in Metro Atlanta, according to King Industrial, larger than Charlotte’s entire industrial market.

Developers are trying to meet the market. The pandemic accelerated online shopping adoption, leading e-commerce companies and retailers to devour additional distribution space in the region. Many companies have also pursued warehouse space as a way to beef up their own stockpiles of goods as the supply chain crisis caused havoc on timely deliveries.

In 2021, 21.5M SF of new construction delivered in the region, up from 2020 but flat from 2019, showing that the pipeline hasn’t been able to keep up with demand.

“That’s a lot of new construction, and you might ask the question, are we building too much? … But the answer would be no,” Doughtie said. “We are absorbing what we are building.”

Roughly 43M SF of new industrial properties are under construction in the region, according to Colliers, and if all of those projects deliver in 2022, it would double the space delivered last year. 

Those developers are hoping to capture the pent-up demand, and so far, 30% of that space has been pre-leased.

“I would characterize it as kind of controlled chaos,” Transwestern Development Co. partner Greg Boler told Bisnow in an email. “We can’t build them fast enough.” 

While there is so much product under construction, developers are still struggling to deliver in a timely manner as they wrestle with shortages in labor and construction supplies, said Boler, whose firm developed 5M SF of warehouse space across the East Coast last year and has another 5M SF planned in 2022.  

Last year, developers faced shortages in roofing materials, concrete, screws and electrical switches, he said.

“We’re still technically in this pandemic,” Boler said. “Again, a lot of that is out of our control.”

Municipalities are beginning to push back against proposed industrial projects, prompted by a growing wave of NIMBYism against warehouses near residential neighborhoods, panelists said at a Dec. 15 Bisnow industrial event.

During the event, GCP President Gardner Lee said one of the biggest obstacles to new warehouse growth is the lack of land with industrial zoning.  

“Availability of land and at reasonable prices from a developer standpoint is definitely the biggest hindrance to us right now,” Lee said. “We’re starting to see some pushback from municipalities who don’t want to see any more industrial.”