The U.S. office vacancy rate stands at 19.4% as demand for office space remains weak, prompting a wave of discounted sales, according to a new report by real estate data company Yardi Matrix.
The share of office transactions that sold at a discount jumped from 20% in 2021 to 46% in 2025 through July, underscoring the continuing impact of remote and hybrid work on the asset class. Offices’ overall vacancy rate of nearly one-fifth remained unchanged from June to July.
Yardi Matrix tracked more than than 3,200 office properties with two or more historical sales prices that have been traded since the start of 2023. Of these, more than 42% (or 1,359) changed hands at a lower value than their previous sale.
Among the top markets, the highest rates of discounted sales were seen in Houston (69%), San Francisco (67%), Manhattan (64%), Washington, D.C. (64%), and Dallas (61%). A stunning 70% of central business districts (CBDs) have sold at a discount since 2023, due to the disproportionate impact of remote work on busy downtown areas. The suburbs have fared better, with just 39% of suburban properties trading a discount since 2023.
Recent examples of office fire sales include 311 S. Wacker Drive, one of Chicago’s tallest skyscrapers, changing hands for $45 million in June – down 85% from its $302 million price tag in 2015. In May, an office and retail building at 799 Market Street in San Fransisco sold for $44 million, a fraction of the $141.3 million that the seller paid for it in 2016.
“Discounts will continue, as demand for office space remains weak and high interest rates persist,” the report predicts. “Loan extensions will likely diminish as maturities peak and lenders grow weary of holding underperforming assets, pushing prices down further.” This dynamic will create opportunities for various types of investors, including those looking to undertake costly conversions.
Nationally, Yardi Matrix is tracking 40.2 million square feet of office space under construction, representing 0.6% of stock. The report notes although the new-construction pipeline has shrunk considerably in recent years, Manhattan – the country’s largest office market – has seen a surge in development activity this summer, with the New York City borough accounting for more than 20% of nationwide office starts through July.
Examples include Related Cos. and Oxford Properties breaking ground on 70 Hudson Yards, a 1.1 million-square-foot office tower, and BXP starting work on 343 Madison, which will measure 930,000 square feet.
Despite the strain caused by work-from-home arrangements, the office sector may experience some relief in the form of job growth. Office-using sectors of the labor market gained 41,000 jobs nationwide year-over-year in July, a 0.1% increase, according to the Bureau of Labor Statistics. Total non-farm employment grew 1% in the same timeframe. This was despite office-using sectors losing a combined 1,000 jobs in the month of July.