Major Western office markets continue to struggle with high vacancies, with the Bay Area experiencing the steepest annual increase, as shown in our latest office report. Notably, Phoenix saw a 3.2% year-over-year growth in office asking rents, highlighting that the office sector in the area remains competitive, even amidst high vacancy rates. 

The region’s office vacancy rate surged 640 basis points year-over-year to 26.3% in January, marking the fourth-highest rate nationally. Meanwhile, San Francisco maintained the highest office vacancy rate among the top 25 U.S. markets at 29.3% after seeing one of the largest increases in the country of g 560 basis points year-over-year. Other key highlights: 

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  • Seattle (26.4%) and Denver (24.9%) also ranked among the five U.S. markets with the highest vacancy rates 
  • Conversely, Los Angeles recorded the lowest vacancy rate in the West and one of the lowest nationally, at 16.4% 
  • Phoenix recorded a 3.2% year-over-year increase in asking office rents in January 2025 
  • The Bay Area was one of only two Western markets to exceed $2 billion in total office sales, closing 2024 at $2.3 billion 
  • San Francisco’s office construction pipeline declined to 3.5 million square feet in January, down from 3.8M in December, dropping from second to third place nationally 

National highlights: 

  • The national vacancy rate stood at 19.7% in January, up 180 points year-over-year, signaling ongoing distress for the office sector 
  • The national average listing rate reached $33.38 per square foot in January, up 5.8% year-over-year amid rising vacancies and discounted sales 
  • 44.1 million square feet of office stock were delivered nationally, marking the fourth year in a row with a Y-o-Y decline 

Construction Starts Continue to Tumble 

Nationally, 44.1 million square feet of office stock was delivered in 2024, the fourth year in a row to witness a year-over-year decline. Only 9.1 million square feet of construction projects broke ground over the past twelve months, bringing office pipeline down to 50.8 million square feet currently under construction, 0.7% of the total stock. The drop in starts represented a 67% decrease from the 27.5 million square feet of office starts registered during the previous twelve months, continuing the decline started during the COVID pandemic. 

2024 Sales Volume Still Below Historic Norm  

Across the U.S., a total of $41 billion in office sales was recorded through the end of 2024, with properties trading at an average of $174 per square foot, according to our U.S. office market report. Total sales volume was up by $3.2 billion year-over-year, while prices fell by $22 per square foot. Since 2019, yearly sales volume fell by $82 billion and prices decreased by $103 per square foot. Despite the recent uptick, sales volume remains far below the historic norm.