The U.S. office market continued to stabilize in June as vacancy declined, construction remained limited, and discounted office sales fueled a growing wave of office-to-apartment conversions, according to Commercial Cafe.
According to the latest Yardi Matrix report, the national office vacancy rate fell to 17.7%, down 170 basis points year over year, while the average office listing rate slipped 2.4% to $33.67 per square foot.
Office Conversions Pick Up Speed
Developers are increasingly targeting aging office buildings for residential redevelopment as lower property values improve project economics.
Yardi Matrix found that 11.8 million square feet of office-to-multifamily projects were completed or under construction in 2025, the highest level on record. Nearly half of office properties that sold since 2024 traded at a discount, creating more opportunities for adaptive reuse.
Chicago has emerged as one of the busiest conversion markets, with nearly 60% of office sales since 2024 occurring at discounted prices. Despite having 47.5 million square feet of office space considered suitable for conversion, Seattle has seen comparatively little adaptive reuse activity.
Manhattan Leads Office Investment
Office investment remained concentrated in several major markets during the first half of the year.
Manhattan recorded more than $4.3 billion in office sales, followed by Dallas ($2.6 billion) and San Francisco ($2.4 billion).
Nationally, office transactions exceeded $30 billion across 1,296 deals, with average sale prices reaching $195 per square foot.
Construction Pipeline Remains Modest
Developers had 29.6 million square feet of office space under construction nationwide in June, equal to roughly 0.4% of existing inventory.
Only Boston, Manhattan, and Dallas had more than 2 million square feet under development, making them the country’s largest active construction markets.
Dallas continues to stand out as businesses relocate or expand in the metro, supported by growth in professional services and finance. Goldman Sachs’ planned 800,000-square-foot campus remains one of the market’s largest upcoming developments.
Vacancy Still Varies Widely
While vacancy declined nationally, conditions differed significantly by market.
Among major metros, Manhattan and Miami posted some of the country’s lowest vacancy rates, while San Francisco remained among the highest at nearly 26%, followed by Seattle at 24.7%.
San Francisco also remained the nation’s most expensive office market, with asking rents averaging more than $65 per square foot, nearly double the national average.
Overall, the report points to an office market that continues to recover unevenly, with stronger investment activity, a limited construction pipeline, and growing interest in converting obsolete office buildings into housing.
