Office vacancy rates dip, but landlords continue to grapple with hybrid work

The beleaguered office sector continues to improve, but recovery remains uneven.

The national vacancy rate for office properties came in at 17.8 percent in March, down 210 basis points year over year, according to a report from research firm Yardi Matrix. Of the top 25 markets in the country, 18 posted yearly declines in their vacancy rates.

However, the national, elevated vacancy rate also underscores how the hybrid work environment that many employees have grown accustomed to is hurting landlords. Office attendance ranges from 38 to 66 percent, according to the report, citing Kastle’s Back to Work Barometer. As a result, many landlords are turning to concessions and lower rents to keep their tenants. In March, the national average listing rate also edged down year over year, by 1.8 percent, to $32.80.

Among the country’s top office markets, Austin continues to have the highest vacancy rate, of 26.2 percent, as the Texas capital, continues to work through a supply glut. On the plus side, Austin’s employment figures are strong, and its office vacancy rate has fallen, by 230 basis points, year over year.

Meanwhile, Miami has the lowest vacancy rate among the top markets nationwide. In March, it came in at 12.5 percent, down 300 basis points compared to the same time last year. Manhattan followed close behind, with a vacancy rate of 13.1 percent.

Despite the sector’s pain points, there are some bright spots. Among the growing uses of traditional office space is coworking, which saw its footprint climb by 16.5 percent year over year, per Yardi. Nationally, coworking occupies 2.3 percent of all office space, which works out to 164 million square feet.

Another booming subsector is medical office, which has benefitted from strong job growth and has avoided major disruption from the remote work trend. As a result, the medical office sector has taken over an increasing share of construction starts — 25.8 percent of starts in 2025, up from 10.9 percent five years prior, according to the report.