US Office Vacancy Rate to Hit 24% by 2026
The big picture: US office vacancy rates are expected to rise to 24% by 2026, up from 19.8% in Q1 2024, according to a Moody’s report. This surge could lead to a $250 billion hit in commercial property values.
Why it matters: The shift to remote work is driving higher vacancy rates, slashing revenue for office landlords by $8-10 billion due to lower rents and lease turnovers.
Key stats:
- Current vacancy rate: 19.8%
- Forecasted 2026 vacancy rate: 24%
- Potential revenue loss: $8-10 billion
- Estimated property value destruction: Up to $250 billion
Context: The rise in vacancy rates reflects the ongoing trend of employers reducing office space, moving to shorter-term leases, and adopting flexible co-working arrangements.
Supporting data:
- Hybrid work: 85% of North American organizations have implemented hybrid work, with major US city offices at 50% pre-pandemic occupancy levels.
- Office space needs: Office workers now require 14% less space than pre-pandemic, according to Moody’s, aligned with McKinsey’s research predicting a 13% global decline in office space demand by 2030.
Expert insight: "The argument for maintaining or even increasing remote work practices remains compelling for many businesses," say Moody’s authors Todd Metcalfe and Tom LaSalvia. If productivity stays stable and costs drop, the rationale for in-office attendance weakens.
What’s next: Vacancy rates will eventually plateau as inefficient office spaces are repurposed into warehouses, residential properties, or more flexible workspaces.
Bottom line: The commercial real estate market is undergoing a significant transformation due to sustained remote work, driving higher vacancy rates and substantial value losses.
