Western office markets faced mounting challenges in December 2024, with San Francisco standing out. The city saw record-high vacancy rates of 28.8% driven by a wave of lease expirations and declining demand. These pressures have also weighed heavily on office asking rents and construction activity, as developers scale back plans in response to shifting market conditions. 

MORE NEWS: The 10 fastest-growing housing markets in Arizona

Key Takeaways: 

  • The average U.S. office listing rate was $33.11 per square foot in December, up 4.5% year-over-year 
  • The national vacancy rate reached 19.8% at the end of 2024, marking a 150-basis-point increase year-over-year 
  • During 2024, 43.2 million square feet of office space was delivered, the lowest yearly total since 2013 
  • Office vacancies continued to rise in 2024, with six of the top 25 office markets recording year-over-year surges of over 500 basis points 
  • Despite shrinking by almost 6 million square feet over the past 12 months, Boston’s office pipeline is still the largest nationwide 
  • Midwestern markets recorded the lowest asking rates nationwide at the end of 2024, with Detroit being the most affordable at $21.46 per square foot 

Another Rocky Year Expected for the Office Market

The office sector is expected to face another challenging year in 2025, our office real estate outlooks show, and the biggest setbacks may not yet be in the rear-view mirror. We are in the early stages of a multi-decade transformation, with the sector still adapting to the post-pandemic world. However, considering the recent and upcoming return-to-office mandates across multiple industries, it remains to be seen what changes and fluctuations are bound to define 2025, some of which are likely to benefit office spaces.  

The national vacancy rate at the end of 2024 stood at 19.8%, an increase of 150 basis points over the last twelve months, as highlighted in our U.S. office market report. We do not anticipate vacancies to fall this year despite high-profile return-to-office mandates from major corporations. Office utilization rates, though imperfect, have plateaued in the last two years, indicating that many companies have permanently embraced remote and hybrid work. While return-to-office announcements from high-profile firms such as AT&T have gained ample media attention, commitments from many companies to downsize their office leases and retain hybrid work have gone under the radar. Any vacancy decreases in the next few years will likely be driven by shrinking office space stock due to obsolescence or conversion, not by a rapid rise in occupied space. 

Where Vacancies Increased the Most in 2024

The national average full-service equivalent listing rate was $33.11 per square foot in December according to our latest U.S. office market report, up six cents since last month and 4.5% year-over-year.

The national U.S. office vacancy rate was 19.8%, marking a monthly increase of 40 basis points and 150 points year-over-year. 

Top Listings by Metro Area: December 2024

While every market witnessed surging vacancies in recent years, some places saw sharper increases than others. Six of the top 25 U.S. office markets saw their vacancy rate increase by more than 500 basis points in 2024. Austin experienced the biggest jump, with a vacancy rate that grew 690 basis points since December 2023, reaching 27.9%. Other markets with significant vacancy increases in 2024 were the Bay Area and Portland (both at 620 basis points), San Francisco and Philadelphia (both at 520 basis points) as well as Boston (510 basis points).

San Francisco Wraps 2024 with Highest Vacancy Rate in the Nation

The surge in vacancy rates registered in 2024 across the nation was driven by a wave of lease expirations, as anticipated by office real estate outlooks. This shift led to San Francisco posting the lowest occupancy rate among major U.S. markets throughout most of the year, below that of Houston and Detroit, the year-ago leaders. By the end of 2024, San Francisco maintained the nation's highest office vacancy rate at 28.8%, up 520 basis points year-over-year.

Three additional Western markets ranked among the five with the highest vacancy rates nationwide: The Bay Area (26.4%), Seattle (26.35) and Denver (24.7%). Despite being the Western market with the lowest vacancy rate a year ago, Portland has also seen a significant rise of 620 basis points in vacancies, exceeding the national average and resting at 21.8%.

West Regional Highlights 

Meanwhile, asking rents in the Bay Area remained mostly flat, recording $54.13 per square foot at the end of 2024, maintaining its position as one of the most expensive U.S. office markets. While most Western office markets continued to be among the priciest in the nation, Denver ($31.09 per square foot), Phoenix ($28.39) and Portland ($27.89) posted asking rents below the national average of $33.11 per square foot.