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Office Vacancy Rate Sees First Significant Decline in Years
Article originally posted on Globe St. on March 30, 2026

Even in a market still defined by uncertainty, February 2026 has a glimmer of encouragement for the U.S. office sector. According to Yardi’s CommercialCafe, national office vacancy averaged 17.6% that month—a two-percentage-point improvement from a year earlier. The decline suggests some long-awaited stabilization, though an elevated vacancy rate underscores how far recovery still has to go.

The imbalance remains stark across regions. Tech-heavy metros such as Seattle, Austin and San Francisco continued to post the highest vacancy in the nation—each above 24%—reflecting the sector’s downsizing and sluggish return-to-office trends. Other markets suffering from double-digit empty space included Detroit, the broader Bay Area and San Diego, followed closely by Dallas, Portland, Denver, and Washington, D.C., all with rates hovering near or above 20%.

On the other end of the spectrum, several Sun Belt and coastal markets stood out for their relative strength. Miami led major metros with just 12.8% vacancy, trailed closely by Manhattan and Tampa. Boston and Los Angeles remained in the mid-14% range, while the Twin Cities, New Jersey, Phoenix and Charlotte posted moderate vacancies between 16.8% and 17.8%.

CommercialCafe attributed the overall national improvement to two key factors. The first was a sharp slowdown in new office construction starts, as developers grew cautious amid ongoing sector distress. Just over 28 million square feet of space remained under construction nationwide in February—an unusually slim pipeline.

The second driver was a wave of office demolitions and conversions to residential or mixed-use projects that has been shrinking the total supply. While such decommissioning reduces available inventory, it also raises a fair question of quality, as much of the eliminated stock consists of buildings no longer competitive with newer, amenity-rich spaces.

That dynamic may also help explain national pricing trends. Average office listing rates slipped nearly 2% year-over-year to $32.79 per square foot in February, according to CommercialCafe—an indication that even reduced supply could not fully offset weaker demand. Manhattan remained the priciest market by far at $73.45 per square foot, followed by San Francisco, Miami and the Bay Area. Cities such as Austin, Boston and Los Angeles rounded out the higher end, with listing rates above $40. By contrast, lower-cost metros, including Detroit, Orlando and the Twin Cities, continued to attract tenants with asking rents below $27.

Investment activity added another dimension to the uneven market picture. Manhattan dominated office sales volume year-to-date, with $1.6 billion in transactions, trailed by the Bay Area and Miami. Markets such as San Diego, Charlotte, and Chicago also recorded solid deal flow, while Houston, Washington, D.C. and Dallas rounded out the top tier.

Finally, despite today’s thinner construction pipeline, a handful of metros still have major projects underway. Boston led the list with nearly 3.9 million square feet of office development in progress, followed by Manhattan, Dallas, Los Angeles, and San Diego. Houston, New Jersey, Austin, Miami and D.C. also maintained modest but notable development pipelines.

The data collectively reveals a sector that’s stabilizing not because of surging demand, but because of contraction—developers pulling back, and landlords taking obsolete buildings off the market. For now, that’s just enough to keep the national vacancy rate moving in the right direction.

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Apartment Occupancy and Rents Edged Up in February
Article originally posted on Globe St. on March 6, 2026

For the first time in nearly two years, apartment occupancy and asking rents posted consecutive monthly gains in early 2026, though annual comparisons remained soft and regional performance varied, according to RealPage’s February 2026 update.

National occupancy ticked up to 94.8% in February, rising 10 basis points in both January and February. Effective occupancy remains 10 bps below year-ago levels and roughly 90 bps below the recent peak in April 2025.

Asking rents also rose, increasing roughly 0.3% over January averages to $1,864. However, rents remain about 0.4% below February 2025 levels, said RealPage.

Supply and demand trends continue to shape market performance. For calendar-year 2025, apartment supply grew 2% to 409,449 units, while demand totaled 365,919 units, leaving a gap that weighed on rents in high-demand regions. In the fourth quarter alone, nearly 90,000 units were added, while demand fell by roughly 40,379 units, the report said.

Regionally, occupancy was highest in the Northeast at 96.1%, followed by the Midwest at 95.6%, the West at 95.1%, with the lowest occurring in the South at 93.9%.

Annual rent changes also diverged. The Midwest rose 2% and the Northeast increased by 0.8%. Meanwhile, the West and South faced declines of 0.3% and 2%, respectively.

Individual market performance reflected regional trends. Sun Belt and Western markets with elevated supply — including Austin, Phoenix and Charlotte — posted some of the steepest annual rent declines, even as leasing activity held steady. Tourism-driven markets such as Tampa, Nashville and Las Vegas also recorded deep year-over-year rent cuts.

Conversely, strong rent growth occurred in Virginia Beach and a handful of Midwest metros — including Chicago, Cleveland, Cincinnati, St. Louis, Minneapolis and Kansas City. Tech-centric coastal markets such as San Francisco, San Jose and New York also outperformed, with some markets up 4.5% to 9% year-over-year.

Housing Industry Coalition Sounds Alarm on “Chilling Effect” of New BTR Language

The National Multifamily Housing Council (NMHC), National Housing Conference, the Mortgage Bankers Association, the Real Estate Roundtable and dozens of housing groups have sent a letter to Congressional leaders. The groups expressed deep concern about language in the 21st Century ROAD to Housing Act, now pending before the Senate, that would effectively eliminate the production of Build-to-Rent (BTR) housing.

“The bill includes new language addressing concerns expressed by President Trump and others about
institutional investors in single-family rentals,” according to the letter. “The Administration committed to exempt the important subset of BTR housing. Yet, as written, the language would have a chilling effect on the entire BTR supply chain by requiring firms owning more than 350 units to dispose of them after seven years.

“Because BTR developments require large-scale investment and benefit from economies of scale, most firms operate beyond that threshold,” the letter states. “They cannot invest under the risk of forced sales and potential losses driven by arbitrary deadlines.”

In a statement, NMHC vowed to “continue to engage with lawmakers to remove the BTR language from the bill and return the legislation to the original goals of the Members of Congress and Administration supporting it.”

Phoenix apartment rents remained flat in February
Article originally posted on CoStar on March 5, 2026

The average asking rent for Phoenix apartments remained unchanged in February, maintaining the slow-and-steady performance seen over the past few months.

Stabilization comes on the heels of back-to-back monthly gains in December and January, resulting in a 0.3% rent increase in the three-month period ending in February 2026. While recent growth is underwhelming for a market that regularly notched monthly gains of 0.3% to 0.5% before the pandemic, it marks a reversal from the trend seen through most of 2025, which saw steady rent cuts.

Gains were essentially flat across the quality spectrum. Monthly growth was range-bound between negative 0.1% and 0.1% in all three of the primary segments: four-and-five-star, three-star, and one-and-two-star.

Performance across geographies, however, was more nuanced.

The pricey North Scottsdale neighborhood was an outperformer. The submarket recorded a 0.5% month-over-month increase in asking rents in February, bringing one-bedroom rents to about $1,925 per month. That amount is the highest of any Phoenix submarket and about 40% higher than the metro-wide average.

On the other side of the metropolitan area, the North West Valley saw rent cuts. The area, which includes places like Surprise, Sun City, El Mirage and Peoria, recorded a 0.8% decrease in asking rents in February, with one-bedroom units now averaging under $1,250 per month.

Furthermore, concession usage remains broadly elevated across the Greater Phoenix area. More than 70% of Phoenix multifamily properties offered new renters some form of discount in early 2026, compared with about 43% nationwide. While the pace of completions is expected to ease this year, concession usage could remain pervasive as operators look to stay competitive while the market takes time to digest record completions in 2024 and 2025.

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A Quick Look at Multifamily Announcements vs Activity - AZBEX By Roland Murphy for AZBEX

Arizona employers are adding jobs and bumping pay slower than normal
Article originally posted on AZ Central on February 11, 2026

Wage growth in Arizona has slowed sharply over the past two years.

Median pay rose about 4.2% over the past year after jumping near 8% in early 2023, as employers nationwide pull back on hiring and the job market cools, according to new data from ADP.

In Arizona, the slowdown marks a shift from the fast gains seen after the pandemic. Jobs are still being added, but at a much slower pace.

But state economist Doug Walls said federal data from the Bureau of Labor Statistics show Arizona’s wage growth has outpaced the nation for much of the past year. In December, Walls said the average hourly earnings in Arizona were up 3.5% year over year, compared with 3.1% nationally — marking roughly 20 straight months of faster growth in the state.

“Three-and-a-half percent is quite healthy,” Walls said, though he acknowledged wage gains have cooled from the surge seen in 2022 and early 2023.

Walls also pointed to inflation trends. Consumer prices in the Phoenix metro area have risen more slowly than the national average over the past year, he said, meaning wage gains in Arizona may stretch slightly further than similar raises elsewhere.

Slower price growth locally “translates into higher real wage growth compared to the U.S. overall,” Walls said.

ADP data shows wage growth in the state has cooled steadily since early 2023.

Employment growth remains positive but is well below normal levels. Economists describe the job market as stable but stuck, with hiring slowing even as layoffs remain limited.

The slowdown is also clear nationwide. In January, private employers added just 22,000 jobs, one of the weakest months since the pandemic recovery began. The data suggests employers are becoming more cautious.

“Job creation took a step back in 2025,” said Nela Richardson, ADP’s chief economist, in a February news release. Private employers added 398,000 jobs last year, down from 771,000 in 2024, and hiring has slowed for three years in a row even as wage growth has remained steady, she said.

The slower wage growth follows a broader cooling in Arizona’s job market last year. While employment continued to grow in 2025, the pace was well below the state’s historical norm, and economists have described the labor market as stable but in a stagnant pattern marked by fewer new jobs, but limited layoffs.

Nationally, most of January’s job losses came from professional and business services, which lost 57,000 jobs. Manufacturing also continued to cut jobs and has lost workers every month since March 2024.

Education and health services were a bright spot, adding 74,000 jobs. Financial services also gained jobs, while employment in the information sector fell.

Job growth varied by region. The Midwest added jobs, while employment declined in the South and West. Large companies cut jobs, while mid-sized firms did most of the hiring.

Despite slower hiring, wage growth changed little. Workers who switched jobs saw pay rise 6.4%, slightly less than in December. Workers who stayed in their jobs saw the strongest raises in finance and manufacturing. Pay growth was weakest in information and other service industries.

In Arizona, wages grew more slowly than the national average over the past year, according to ADP data.

Economists will be watching upcoming data to determine whether January’s weak hiring reflects a temporary pause or a broader slowdown. The next major test comes Feb. 11, when the U.S. government releases its January employment report.

US office forecast brightens as demand steadies, obsolete space removed
Article originally posted on CoStar on February 5, 2026
Robust office leasing by tech firms helped kickstart the office market's recovery in 2025, including Databricks' late-year deal for over 150,000 square feet at 250 W Washington Ave., part of Silicon Valley's Sunnyvale CityLine mixed-use development. (CoStar)

U.S. office vacancy appears to have reached a cyclical peak, topping out at 14.2% in mid‑2025, before edging down slightly by year’s end as the updated CoStar forecast anticipates stable vacancy through the end of 2026.

That’s now expected to be followed by a gradual decline that would bring the headline vacancy rate near 13% by 2030.

This revised outlook takes a somewhat more optimistic long-term view than the previous forecast, which called for vacancy to keep rising until late 2026 and remain well above 13% through the end of the decade. The shift reflects recovering tenant demand during the back half of 2025, driven by a stabilization in per-worker space needs even as hiring in the traditional knowledge industries continued to lag.

At the same time, a substantial increase in conversion and demolition activity has begun to reshape the market. More than 35 million square feet were removed from inventory in 2025 — about 10 million square feet above the long‑run annual norm.

With interest rates stabilizing and price discovery for building trades improving, more low‑basis sales are expected in the months ahead, which could trigger additional redevelopment and conversion projects. The accelerated removal of obsolete space, paired with historically limited new construction, should lead to a slow easing of the vacancy rate after 2026.

Compared with prior expectations, CoStar’s revised forecast calls for roughly 10 million square feet less occupancy gains in 2026 as office-using job growth continues to decelerate. On the supply side, the near-term outlook is similar, as about two-thirds of the remaining under-construction pipeline is set to be completed this year. The resulting vacancy projection for the end of 2026 is very similar to the previous forecast.

The outlook for the office sector improves after 2026, however. Steady per-employee occupancy signals a reconnection of office demand with job growth, which should support additional office space demand if hiring strengthens as anticipated in 2027.

Meanwhile, elevated demolition activity is likely to continue reducing obsolete inventory for several years, while the record-low level of construction starts that has persisted since mid-2023 indicates that new completions will remain subdued for some time.

Rent growth is expected to hold steady throughout 2026, though the annual average is likely to remain below 1% until an expected acceleration in early 2027 that coincides with the expected pickup in job growth.

While this is a slight change from the earlier outlook, the broader theme remains intact: A scarcity of premium space should continue to support stronger rent performance in the most desirable buildings. In some markets, this should include well‑located assets that do not meet the Class A standard.

Risks to the revised outlook remain balanced. Some occupiers may need to expand footprints simply to accommodate office workers attending more consistently, even without strong new hiring. On the other hand, the recent productivity-driven divergence between economic growth and job growth could persist, especially if advances in AI enable firms to expand output with fewer employees. That could dampen demand for additional space.

Looking further ahead, office demand growth is expected to stay muted relative to historical averages due to lower long-term population and job growth. As a result, vacancy is expected to remain structurally higher, staying above its Great Recession peak beyond 2030 despite the supply-side adjustment.

Even so, a shrinking pool of available first‑generation office space should help support steady rent and price growth among the most competitive and desirable buildings.

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Freddie Mac’s Multifamily Volume Jumps 17% in 2025 Freddie Mac’s 2025 multifamily volume was up 17% over 2024, the government-sponsored enterprise (GSE) reported. Its production volume totaled $77 billion. | The GSE closes $77 billion in production and sets a record for LIHTC equity investments.

Multifamily Rents Flat in 2025, Modest Growth Seen Ahead
By Christine Serlin Jan 13, 2026 7:27pm

Multifamily rents ended 2025 where they started, according to Yardi Matrix’s National Multifamily Report. The U.S. average advertised rent decreased $5 to $1,737 in December, with year-over-year growth dropping 20 basis points to 0%.

“Years without growth are rare. The last one with no average national advertised rent recorded was the 2020 pandemic year,” noted the report. “Before that, the last one without a national rent increase was the recovery from the global financial crisis in 2010. We expect modest increases in 2026.”

Performance in the fourth quarter also marked the weakest showing since the global financial crisis, raising concerns about near-term rental demand.

Year-over-year rent growth continued to be strongest in gateway and Midwest markets in December. New York continued to lead the way with 5.8% annual growth, followed by Chicago, 3.6%; the Twin Cities, 3.2%; and Kansas City, Missouri, 2.6%. Negative rent growth continued to be seen in many high-supply Sun Belt and Western metros, with Austin, Texas, at -5.2%; Phoenix at -4.1%; Denver at -3.9%; Las Vegas at -2.5%; and Portland, Oregon, at -2%.

The national occupancy rate inched down to 94.6% in November, flat compared with the prior year. According to Yardi Matrix, several markets posted year-over-year occupancy gains despite weaker rent growth, including Atlanta, up 0.9%, and Phoenix, up 0.3%.

Month over month, only six of Yardi Matrix’s top 30 markets saw positive advertised rent growth in December. These were largely concentrated in the Midwest, led by Kansas City; Columbus, Ohio; Baltimore; and Detroit. Rents at both lifestyle and renter-by-necessity assets also were down.

“This performance highlights a widening geographic divide. Midwest metros have emerged as some of the most resilient, driven by limited new supply and greater affordability,” stated the report. “In contrast, many Sun Belt markets are still absorbing a wave of deliveries from recent years, which has weakened pricing amid softer demand. Meanwhile, coastal markets—despite avoiding significant supply growth—are facing affordability constraints, as already-high rent levels leave them especially sensitive to economic uncertainty and shifts in renter demand.”

Advertised rents also saw a decline on the single-family rental (SFR) side, falling $4 to $2,180 in December, with year-over-year growth down 1%. This marks the largest drop in over a decade, exceeding November’s 0.7% decline.

Similar to multifamily, rents are remaining elevated in many Midwest markets, including the Twin Cities at 7.7% year-over-year growth, Chicago at 7%, and Grand Rapids, Michigan, at 4.5%.

“The national rent declines are not the result of weak demand, as occupancy rates are stable. Slow single-family home sales continue to support SFR demand. While mortgage rates may edge slightly lower, they are likely to remain near current levels, keeping many would-be home buyers on the sidelines,” noted the report. “And SFR owners are willing to moderate rent growth to maintain occupancy, especially in high-supply markets.”

https://www.cnbc.com/2026/01/07/commercial-real-estate-migration.html

Americans are changing where they're moving. Here's how that could affect commercial real estate Americans are increasingly moving to smaller markets rather than urban cores as they seek cheaper housing and better quality of life.