Dr. Gleb Tsipursky – The Office Whisperer
Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
Drew Jones – Design & Innovation
Jonathan Price – CRE & Flex Expert
This article is the second in a new series exploring the product-market fit crisis currently plaguing the commercial real estate market. As a globally recognized leader in flexible workspace strategy with more than 25 years of experience shaping real estate across 65+ countries, Andrea Pirrotti-Dranchak brings a rare perspective on how product–market fit is reshaping commercial property. Across the series, she explores where landlord offerings and occupier demands diverge — why that divide is so costly — and how the industry can realign.
When landlords miss product–market fit, the cost is real — and it hits both sides of the table. For landlords, it shows up in loan delinquencies, declining valuations, and vacancy that won’t go away. For occupiers, it means wasted money on empty desks and a workplace strategy that doesn’t match the way their teams actually work.
This isn’t a theoretical problem. It’s a live one — and the numbers from 2025 show just how much value is being destroyed when the product no longer matches the market.
The Landlord Side of the Ledger
The financial strain on office owners is clear. Nearly 11% of office CMBS loans were delinquent by mid-2025, the highest since the global financial crisis (CREFC / Trepp). That compares with a pre-pandemic baseline of less than 2%.Â
Loan maturities are compounding the problem: about $957 billion of commercial and multifamily mortgages mature in 2025 (MBA), and roughly $277 billion of securitized CRE loans (including CMBS) are coming due (CRED iQ).
Vacancy makes the refinancing challenge even worse. National office vacancy hovers near 19.9% (Yardi Matrix). In San Francisco, the figure is 34.8% (CBRE). Chicago’s central business district is at 24.3% (Colliers), and Austin’s office vacancy sits at 23.1% (Colliers). Even Los Angeles is holding at 24.1% (Bisnow).Â
These aren’t rounding errors. They represent millions of square feet generating no rent while debt service continues.
The problem is not just empty floors but the wrong kind of space. Activity is clustered in deals between 3,000 and 15,000 square feet, while large blocks languish (Trepp).Â
The average lease term for new U.S. office deals has dropped to just over seven years, down from the traditional 10, and tenants are increasingly demanding early-termination clauses (CBRE). A signed lease doesn’t guarantee 10 years of income anymore.
Sublease space reinforces the point. More than 130 million square feet of offices are currently being marketed for sublease — double the pre-pandemic level (Cushman & Wakefield).Â
These are leases that technically exist on paper but no longer reflect true demand. For landlords, the misfit shows up as space they thought was spoken for but is now being shopped at a discount, dragging values down even further.
The Occupier Cost of Misfit
The cost isn’t just on landlords. Occupiers pay heavily when the space they lease doesn’t align with how they actually use it.Â
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Hybrid schedules mean offices sit partly empty most days. In 2025, office attendance averages just 40% on a given day across U.S. markets (Kastle Systems).
That has direct financial consequences. A company leasing 50,000 square feet at $50 per foot pays $2.5 million annually. With only 40% of desks in use, more than $1 million is wasted every year — a figure backed by workplace utilization data (VergeSense, Q1 2025 Occupancy Intelligence Index).
But the costs aren’t only financial.Â
Paying for space that employees don’t use undermines the credibility of leadership. It signals that real estate strategy is disconnected from business reality. That disconnect affects employee morale, retention, and recruitment.Â
Why commute to a half-empty office that feels irrelevant? In a labor market where companies compete on culture as much as compensation, office misfit becomes a liability.
Retail offers a useful analogy. Stores that misjudge demand and carry excess inventory don’t just tie up capital — they discount heavily, dilute the brand, and eventually shutter locations.Â
Real estate operates the same way. Empty desks are dead stock, and they weigh down the balance sheet.
The Shared Risk
Both sides lose when product–market fit is missing. For landlords, it’s higher delinquency rates, strained refinancing, and vacancy that drags asset values down.Â
For occupiers, it’s misalignment between real estate and business strategy — and millions wasted on space that doesn’t match how teams actually work.
The dynamic is also self-reinforcing. Tenants that overpay for underused space are less likely to renew. Landlords that overbuild for the wrong tenant profile are more likely to default.Â
The cycle compounds, leaving both sides worse off.
Closing Thought
The cost of misfit is measured in defaults, wasted rent, and declining value. It shows up on lender balance sheets, in corporate P&Ls, and across the skylines of cities with record vacancy.
Product–market fit is not a buzzword. It is the line between relevance and obsolescence. Landlords who recalibrate to match the way occupiers actually use space can protect value. Those who don’t will continue paying the price.
In the next installment of this article series, Andrea outlines a framework for how landlords can align their portfolios with modern occupier behavior and decentralized decision-making. Look for it exclusively on Allwork.Space on September 24.
Did you miss Part 1 of the series, which introduced the disconnect between what landlords offer and what occupiers want? Read it here: The Product–Market Fit Crisis In Commercial Real Estate: Who’s Really Listening To Occupiers?
