Office Leasing Nears 2022 Record as US Vacancy Falls to 18.2%

A market that stopped shrinking

The U.S. office market has spent most of the time since 2020 losing ground. In the third quarter of 2026 it posted a gain big enough to change that picture. CBRE's latest quarterly report shows leasing rose 4% from a year earlier, and the company says full-year volume is on pace to beat the 2022 record of 238 million square feet.11 Third-quarter leasing came to 63.8 million square feet. Net absorption, which measures occupied space gained minus space given back, was positive for the tenth quarter in a row.22 National vacancy slipped to 18.2%, the fifth straight quarterly decline.22

Stefan Weiss, who leads CBRE's U.S. office research, called this a "new normal." In his view, the "rightsizing" that followed the shift to hybrid work has run its course, and space per employee has crept up for three years.11 That is the main claim here. If it holds, the debate shifts from whether offices have a future to which offices do, and who carries the losses on the rest.

The numbers behind the turn

The headline figures look solid. CBRE's average asking rent rose 3.1% from a year earlier to $37.95 per square foot. That is the fastest increase since 2016 and well above the 30-year average of about 2%.22 New leases, as opposed to renewals, made up 61% of leasing so far this year, up from 56% in 2025. Before the pandemic the figure was closer to 70%.11 The higher share suggests tenants are expanding or moving rather than just keeping the space they have.

Office policies are pushing in the same direction. CBRE's occupier survey found 89% of employers now require at least three days a week in the office, up from 78% a year earlier.11 Weiss argues that shared in-office days stop companies from cutting space too far. He also argues that AI is more likely to automate tasks done by fully remote workers than the collaborative work that needs an office.26 CBRE expects vacancy to keep falling, to roughly 14% by the early 2030s.26

The sharpest change is at the top of the market. CBRE puts prime vacancy at 11.9%, down 250 basis points in a year, and prime vacancy in Midtown Manhattan at just 1.9%.22

Where the trackers agree and where they don't

The major brokerages agree on the direction but not on how far the market has moved. Cushman & Wakefield puts national vacancy much higher, at 19.8%, down only about 25 to 30 basis points from its Q3 2025 peak.2123 It recorded just 50,000 square feet of net absorption for the quarter, against CBRE's 4.9 million.2122 JLL landed in between, with 6.0 million square feet of occupancy gains and 21 million for the year to date.24 Yardi's CommercialCafe uses a different method and reports the lowest vacancy of the group, 17.8% in September.28

The gaps come mostly from different definitions and building samples, and none of them changes the overall direction. Still, a recovery measured at 50,000 square feet in one quarter is not the same as one measured in millions. CBRE's figures read best as the strong end of a range.

The trackers fully agree on one point: the recovery is uneven. Cushman reports that vacancy in top-tier buildings has fallen 215 basis points over two years, while vacancy in Class B and C buildings keeps rising.23 Yardi's research director says the bulk of Class B space still faces "significant demand obstacles."28

The coverage also disagrees on jobs. CBRE projects office-using employment to grow 0.9% a year over the next five years.11 Yardi's data shows office-using employment fell by 104,000 jobs, or 0.3%, over the past year, while total payrolls grew.28 For now, an occupancy recovery built on a shrinking office workforce depends on supply, not demand.

Supply is doing much of the work

That makes supply the more important part of the story. CBRE reports construction completions down 76% from a year ago.11 Cushman counts 7.1 million square feet delivered through three quarters, the lowest nine-month total in more than 30 years.21 Older buildings are also leaving the market. Cushman says total inventory has shrunk by 42.5 million square feet over six quarters as obsolete properties are converted to other uses, including housing.23 JLL says inventory is down more than 45 million square feet from its late-2023 peak.24 Sublease space, often a leading indicator, has fallen to its lowest level since 2020.23

The market is tightening because the amount of competitive space is shrinking. Demand is steady but not booming. This matters for how long the recovery can last. Cushman notes the construction pipeline has risen 20% from its low, led by new starts in Manhattan and elsewhere.21 For the next few years, though, scarcity favors owners of the best buildings.

REITs: pricing power, but cash lags

Third-quarter results from office real estate investment trusts show both sides. Piedmont Office Realty Trust reported cash leasing spreads of 26.2%, one of the highest in its history, but in-service occupancy fell 120 basis points to 87.7%.41 Management said asking rents in its markets are still about 40% below the level needed to justify new construction, and expects rent growth to continue.45 Highwoods Properties reported 29% GAAP rent growth on second-generation leases. Its cash same-property NOI rose only 0.2%, because free rent and upfront leasing costs delay the cash payoff.49

Other REITs showed the limits. Kilroy signed more than 815,000 square feet, one of its best quarters since 2019, but its funds from operations fell 18.5%. Its leverage rose to 7.2 times net debt to EBITDAre.46 American Assets Trust raised its office portfolio to 85.8% leased, up about 400 basis points in a year. However, its cash leasing spreads narrowed to 2.1% from 9.1% the previous quarter.4447

Overall, landlords with modern, well-located space can now raise rents. Turning that into cash flow takes time, and heavy leasing costs and debt still weigh on results.

The debt problem hasn't gone away

The recovery in leasing has not reached loan performance. The Mortgage Bankers Association reported that 4.97% of CMBS loan balances were 30 or more days delinquent in the third quarter, up from 4.82%. Office had the highest delinquency rate of any property type.1 MBA chief economist Mike Fratantoni warned that a large wave of loans coming due, combined with a recent jump in interest rates, will remain a headwind.1 Delinquency rates at banks' main competitors in CRE lending, life insurers and the GSEs, also rose but stay low by historical standards.1

Trepp's figures for office loans in CMBS are starker. The delinquency rate reached 12.2% in September, second only to January's record and well above the 10.7% peak of the financial crisis.56 The largest new default was a $1.1 billion loan on Hollywood office and studio properties held by Blackstone Property Partners and Hudson Pacific Properties. The borrowers received a 14-month extension, but lease renewals with Netflix and 20th Century Fox are still uncertain.6 A $470 million Brookfield loan on downtown Houston towers that are 71% occupied also missed its payoff.6

These defaults are not a contradiction. Many troubled loans were made at near-zero rates on valuations set before the pandemic. Better leasing at the top of the market does not fix a balance sheet built for a different interest-rate environment. CNBC framed the situation as both stress and opportunity: office CMBS delinquency is at 12.16%, even as occupancy and values recover.10 Some investors are betting on that gap. CBRE expects office investment volume to rise 10% this year to $91.1 billion.22

Apartments: tightening without much rent growth

The residential market is following a similar pattern of tighter vacancy with modest rent gains. Apartments.com reports national apartment vacancy fell to 7.8%, its lowest since late 2023, as the construction wave fades. Concessions rose to 4.2%, so renters still have bargaining power.34 Apartment List puts the national median rent at $1,388. That is down 0.4% from a year earlier, but annual growth has been steadily improving.31 Zumper shows one-bedroom rents up 0.5% annually, the strongest reading since May 2025.32 Zillow's measure is higher, with typical rent at a three-year high of $1,932 and demand up nearly 20%.38

The two markets are linked through conversions. Obsolete offices turned into housing reduce office inventory, and that is one reason office vacancy is falling.23 Over time they could also add apartment supply just as the current rental surplus clears.

The takeaway

The office recovery is real, but it is narrow and driven by supply. Prime buildings in tight markets are doing very well, and the REITs that own them are raising rents. Commodity buildings, highly leveraged owners and the CMBS holders behind them are still dealing with problems from the pandemic and higher interest rates. A record leasing year would mark a real turning point. The next test is whether occupancy gains spread to Class B buildings before the remaining loan maturities come due.