Vacant offices pile up — but rents keep climbing

Almost a fifth of the country’s office space was empty in July, as rents rose year over year.

The national vacancy rate for the office market was 19.4 percent last month, up 130 basis points compared to the year before. Meanwhile, asking rents climbed 3.3 percent during that time to $32.72, according to a report from CommercialCafe.com.

Office demand has been weak across the country, particularly amid high interest rates and peaking loan maturities, according to the outlet, an extension of real estate data firm Yardi Matrix. Lenders may be less likely to extend mortgages for underperforming assets.

Some 14,000 office properties are tied to loans that have recently matured or will mature by the end of 2027, according to Yardi. This represents 33 percent of office loans valued at $390 billion.

Austin posted the greatest office vacancy rate, 27.2 percent, in July among the top metros in the U.S. Its rate had climbed 430 basis points year over year, the third-highest growth rate. This rise came as rents in the Texas capital soared 8.3 percent to $45.61 — the seventh-highest growth in the country.

Austin’s high office vacancy rate has caused some investors, like Starwood Capital Group, to begin exiting the market, while others have seen it as an opportunity to pick up space in a market they believe will rebound soon.

Following Austin with the second-highest vacancy rate of 27 percent was Seattle. The Emerald City’s rate had jumped 350 basis points year over year.

Meanwhile, Miami and Los Angeles recorded the lowest vacancy rates in July, of 14.3 percent and 14.5 percent, respectively.

Houston’s vacancy rate dropped the most — by 270 basis points — compared to the year before. However, Houston’s rents also plunged the most, by 7.6 percent year over year, of the country’s top metro areas.

Houston was also the market with the greatest share of discounted office sales, as 69 percent of buildings in that market since 2023 sold for less than their prior prices. Countrywide, 42 percent of deals since 2023 were discounted.