Office space consultant Cushman & Wakefield released a report showing vacancy rates fell to 13.9 per cent in the second quarter of this year, compared to 14.6 per cent in the first quarter. At the same time last year, office space vacancy in business districts was 14.8 per cent.
Approximately 260,000 workers were added by US businesses in the second quarter of this year, the US Labor Department noted.
“It’s a reflection of the pent-up demand in the market,” Maria Sicola, Head of Americas Research at Cushman, told Bloomberg.
“Economic growth has been slow, but we are growing.”
Figures from the beginning of this year have borne out this assessment, with leases for 41.8 million square feet of office space being signed in the first two quarters.
The second quarter saw 23.6 million square feet leased according to the Cushman & Wakefield report. This represents the highest three-month total since late 2006.
San Francisco, Chicago and Manhattan all saw occupancy grow in the second quarter.
In San Francisco, technology companies have been behind much of the drop in vacancy rates. The city’s vacancy rate fell to 11 per cent from 11.9 per cent in the first quarter of 2011. Average rent rose to $38.95 per square foot, up from $36.24.
The South of Market area of San Francisco has increased in popularity with tech firms, Cushman & Wakefield stated.
Sicola stated: “There hasn’t been a lot of development – more retrofitting – but the demand continues to grow,” she said.
“You have an interesting area, which is not your traditional core but that has a lot of amenities.”
Editor’s notes: In Q1 of 2023, the national US office vacancy rate in the US stood at 20.2 per cent.
San Francisco’s vacancy rate was 26.8 per cent, which was the highest rate in the country.
Chicago’s vacancy rate was 23.5 per cent, and Manhattan’s office space vacancy rate stood at 16.1 per cent.
*Vacancy rate refers to the proportion of available office space that is not leased. For example, if 90,000 square feet of a 100,000-square-foot building is leased, the vacancy rate of that building is 10 per cent.
The vacancy rate is not the same as the occupancy level. Using the above example, while 90,000 square feet of the building is leased, that doesn’t reflect how intensely the space is used.
If the 90,000 square feet were leased to a company that switched completely to remote work, or if the company had to lay off staff, the result would be a low occupancy level.
Occupancy levels matter to many landlords because low occupancy in a tenant’s space can indicate the tenant will exercise a break clause as soon as possible and will not wish to renew their lease.
Reduced footfall could also be detrimental if, for instance, there are retail tenants on the ground floor. Fewer office workers will hurt those businesses and could lead to more voids within the property.
US nationwide net absorption in Q1 2026 totalled 6.9 million square feet, the highest Q1 total since 2020 and the eighth consecutive quarter of positive demand.
In the first quarter of 2026, the overall US national office vacancy rate was 18.6 per cent, and the prime office vacancy rate was 12.7 per cent, reflecting the ongoing flight to quality.
Among the major US office markets, San Francisco, CA (circa 27 per cent), Seattle, WA (24.9 per cent), Austin, TX (24.5 per cent), and Portland, OR (22.1 per cent) had the highest vacancy rates.
Miami, FL (12.5 per cent), Manhattan, NY (13 per cent), Los Angeles, CA (14.5 per cent), and Phoenix, AZ (16.9 per cent) had the lowest rates.