Dr. Gleb Tsipursky – The Office Whisperer
Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
Drew Jones – Design & Innovation
Jonathan Price – CRE & Flex Expert
A financial crunch is looming for the U.S. office real estate market, as thousands of properties approach the end of their loan lifecycles. New data from Yardi Research estimates that nearly 14,000 office buildings — representing 33% of all office loans — are tied to mortgages that either have already matured or will do so by the end of 2027. That total debt amounts to nearly $290 billion.
This growing wave of loan maturities comes amid rising delinquencies and waning lender willingness to extend terms. According to Moody’s, loan extensions are down compared to 2023, while defaults are trending up.Â
Meanwhile, Trepp reports that delinquency rates for office commercial mortgage-backed securities (CMBS) surged to 11.08% in June — an increase of 3.5 percentage points from a year prior.
Tough Decisions Ahead for Office Owners
The mounting pressure is a sign that the industry may have run out of road to kick the proverbial can. With interest rates still elevated, weak job growth in office-using sectors, and stubbornly high vacancy rates, both lenders and borrowers are being forced into difficult decisions. Many struggling properties are likely to see further price reductions in the coming months, according to Commercial Cafe.
Some cities are now exploring or accelerating office-to-residential conversions as public policy begins to support repurposing outdated assets. These conversions could provide a new lease on life for properties left behind by the rise of remote work and changing space needs.
Regional Breakdown: Atlanta, Chicago, Denver at High Risk
Among major office markets, Atlanta is facing the largest share of loans maturing by 2027, with more than half — roughly 50.5% — of its office debt ($11 billion) coming due. Denver follows at 49% ($8.4 billion), and Chicago is not far behind at 46%, with $15.3 billion in loans approaching maturity.
Smaller metros are not immune. The Bridgeport-New Haven region in Connecticut has 48.5% of its loans maturing by 2027, while the Twin Cities market faces 41.2% ($3.4 billion).
Leasing Trends and Vacancy Rates Remain Challenging
As of June, the national average listing rate for office space was $32.87 per square foot, a slight monthly dip, but still 3.8% higher than a year earlier. However, the national vacancy rate held steady at a historically high 19.4%.
Manhattan remained an outlier, with its vacancy rate dropping to 15.2% over the past 12 months. The borough’s resilience is largely attributed to its concentration of legal and finance tenants, as well as urban density that discourages remote work due to limited in-home office space. Major deals, such as Amazon’s 330,000-square-foot lease at 452 Fifth Avenue, have also bolstered demand.
Construction Hits Record Lows Amid Life Sciences Oversupply
Across the U.S., just 41 million square feet of office space was under construction as of June 2025, about 0.6% of national inventory, marking the slowest construction pace in recent years. Only 6.5 million square feet were started in the first half of the year, on pace with 2024’s already sluggish performance.
Even the once-booming life sciences sector is now showing signs of strain. In San Diego, for example, more than half of the 2 million square feet under development is lab space — despite growing vacancies in newly delivered R&D campuses such as IQHQ’s RaaD and the Campus at Horton.
Western Markets See Soaring Vacancies, Premium Rents
San Francisco’s office vacancy hit 27.7% in June, while San Diego saw a 500-basis-point increase year-over-year, reaching nearly 23%. Despite these figures, asking rents remain high in California: San Francisco averaged $63 per square foot, while San Diego, Los Angeles, and the Bay Area all posted rents well above the national average.
Office sales in the Bay Area led the West in value, totaling $3.17 billion through the first half of 2025, with properties averaging $387 per square foot. In contrast, Denver and Phoenix posted sales below the national average of $189 per square foot.
Midwestern Markets Offer Affordability and Steady Activity
Chicago continued its investment momentum, nearing $1 billion in sales by midyear, despite having the lowest average sale price among top markets ($57 per square foot). Meanwhile, the Twin Cities maintained the lowest vacancy rate in the region at 17.5%, with rents rising modestly to $26 per square foot.
Development remains limited, with the Twin Cities and Phoenix among the few markets to see year-over-year increases in construction. Detroit, despite having the region’s lowest lease rates ($21.60 per square foot), had the highest average sale price ($88) in the Midwest through June.
Southern Strength: Miami Leads in Prices, Texas Powers Construction
Miami stood out as the South’s most expensive market, with office rents nearing $57 per square foot and average sales hitting $255 per foot. But it was Washington, D.C., that led the region in total sales volume, reaching $3.1 billion in the first half of 2025.
Texas markets remain active on the construction front: Dallas-Fort Worth led with 3.25 million square feet underway, followed by Austin and Houston. However, both Austin (28%) and Dallas (23.2%) had some of the highest vacancy rates in the South.
Northeastern Markets Stay Resilient
Manhattan continues to command the highest prices in the Northeast across nearly every metric — lowest vacancy (15.2%), highest rent ($68), and top average sale price ($437 per square foot). Office sales here totaled $2.7 billion through June.
However, Boston now claims the largest construction pipeline in the country with nearly 6 million square feet underway. Philadelphia remains one of the most affordable major markets, with average rents below $31 and sales averaging just $89 per square foot.
Stalled Job Growth Adds to Uncertainty
Adding to the pressure, job growth in office-using industries has been nearly flat, increasing just 0.1% in the past year. With hybrid and remote work remaining popular and companies continuing to rethink space needs, the outlook for office demand remains uncertain.
In response, more cities and investors are turning to property conversions as a long-term strategy, particularly for outdated or underutilized buildings.
