Momentum continues to build in the U.S. office market, though challenges remain, according to Cushman & Wakefield’s third-quarter U.S. Office MarketBeat.
Cushman & Wakefield’s latest research shows that the national office vacancy rate declined year-over-year for the third consecutive quarter, sublease availability fell to its lowest level since 2020 and new construction remained near historic lows.
Net absorption totaled positive 50,000 square feet during the third quarter, extending the market’s streak of positive absorption to five consecutive quarters. Over the past year, U.S. office absorption totaled positive 15.5 million square feet.
National office vacancy stood at 19.8% at the close of the third quarter. While vacancy has remained broadly stable near 20% for the past two years, it declined 25 basis points from a year ago, marking the third consecutive quarter of year-over-year improvement.
Vacancy was also lower than a year ago in 48 of the 92 U.S. markets tracked by Cushman & Wakefield, including San Francisco, Manhattan, Orange County, Charlotte, Phoenix and Dallas.
“The U.S. office market is showing increasingly consistent signs of stabilization,” said David C. Smith, Head of Americas Insights at Cushman & Wakefield. “Occupier demand continues, sublease inventory is steadily declining, and obsolete buildings are increasingly leaving the competitive inventory. While conditions vary considerably by market and asset, these trends are creating a stronger foundation for a tightening office market.”
Sublease inventory falls to lowest level since 2020
Vacant sublease availabilities declined for the 10th consecutive quarter in the third quarter and are now 33% below the peak hit in the first quarter of 2024. At 89 million square feet, sublease inventory is at its lowest level since the fourth quarter of 2020 and accounts for 1.6% of total U.S. office inventory, approaching its long-term average of 1.5%.
The decline is an important indicator for the broader office market. Historically, sublease inventory has peaked ahead of overall vacancy. Sublease availability reached its most recent peak in the first quarter of 2024, while national vacancy reached a recent high of 20.1% in the third quarter of 2025 and has since declined to 19.8%.
The recovery remains uneven across building classes. Vacancy among top-tier office properties has declined 215 basis points over the past two years, while vacancy in Class-B and -C properties has continued to rise, highlighting the widening performance gap between higher-quality buildings and the broader market.
New office supply approaches 30-year low
The national construction pipeline increased for the second consecutive quarter to 23 million square feet but remains near historic lows. Just 7.1 million square feet of new office space was delivered through the first three quarters of 2026, approximately one-fifth of the historical average. Based on the current pace, full year 2026 completions are on track to equal the lowest amount of new office space delivered in more than 30 years.
At the same time, the existing office inventory continues to contract as competitively obsolete properties are converted to other uses, such as residential. Total U.S. office inventory has declined by 42.5 million square feet, or 0.8%, over the past six quarters, while more than one-third of U.S. markets have seen office inventories decline by at least 2% from recent peaks.
“The supply side of the office market is undergoing a significant reset,” Smith said. “New construction remains historically low while obsolete inventory continues to be removed from the market. Combined with stabilizing demand, that reduction in supply should support further improvement in office fundamentals.”
