The U.S. office market showed more signs of stabilization in July, with the national vacancy rate falling to 17.7%, down 130 basis points from a year earlier.
The improvement was widespread but uneven. Of the 25 largest office markets tracked, 19 recorded lower vacancy than a year ago. Asking rents also increased, reaching an average of $33.58 per square foot, up 2.6% year over year, according to Commercial Cafe.
Dallas Breaks Below 20% Vacancy
Dallas recorded one of the more notable improvements, with vacancy falling to 18.7% in July. It was the first time the market had dropped below 20% since 2023.
Miami remained among the strongest major office markets, with vacancy at 11%. Manhattan also ranked among the markets with the lowest vacancy rates.
San Francisco remained one of the weakest, with vacancy approaching 26%. Its average asking rate, however, remained among the country’s highest at more than $63 per square foot.
Medical Office Is Holding Up Better
The divide between traditional and medical office continues to widen as healthcare demand supports properties that require physical locations.
Medical office starts have fallen just 9.5% this decade, compared with a 73% decline in traditional office starts. Medical office accounted for 26.2% of the office construction pipeline in 2025, up from 11% in 2020.
Property values have also been more resilient. Of nearly 500 medical office properties with comparable sales data since 2024, 67% appreciated in value, compared with 52% of general office properties.
The difference was particularly pronounced in markets with older populations. In Tampa, 90% of medical office transactions in the analysis involved properties that appreciated, compared with 71% of traditional office properties. Phoenix recorded a similar gap.
Manhattan Leads Office Investment
Office investment also remained concentrated in a handful of major markets.
Manhattan recorded nearly $5.2 billion in office sales through July, followed by Dallas at nearly $2.9 billion, the Bay Area at $2.62 billion and San Francisco at nearly $2.6 billion.
Nationally, office sales exceeded $36 billion across 1,576 transactions during the first seven months of 2026.
San Francisco’s average office sale price rose to $543 per square foot, second only to Manhattan’s $575. That remains roughly half of San Francisco’s 2020 peak of $1,060 per square foot, underscoring the challenges facing many central business district properties.
Construction Remains Limited
Developers had roughly 29.5 million square feet of office space under construction in July, equal to about 0.4% of existing stock.
Construction was heavily concentrated in a few markets. Boston, Manhattan and Dallas each had more than 2 million square feet in development and together represented nearly 31% of the national pipeline.
The improving vacancy numbers come as office-heavy employment remains under pressure. Office-using sectors added 15,000 jobs in July, but employment in those sectors was down 80,000 jobs from a year earlier.
Portland recorded the largest decline among major metros, with office employment falling 3.8% year over year.
