The office market is in crisis, and it’s not just about empty desks. Economic uncertainty and the rise of AI are reshaping the workplace in ways we’re only beginning to understand. While companies push for employees to return to the office, the reality is stark: job growth has stalled, and real estate expansion plans are on hold. But here’s where it gets controversial—is this the end of the traditional office, or just a painful transition to something new?
The numbers don’t lie. After a brief stabilization in mid-to-late 2024, the national office vacancy rate is climbing again, hitting a record high of 20.7% by August. And this isn’t just about outdated buildings—even Class A properties, once the crown jewels of the market, are feeling the pinch. The chart above tells the story: leased space in both Class A and Class B/C properties has plummeted since 2021, with the so-called “flight-to-quality” trend of early 2023 now a distant memory. Even hints of recovery in the third quarter of 2024 have vanished, leaving us with a downward spiral that shows no signs of stopping.
The consequences are dire. Entire office buildings are at risk of becoming ghost towns, forcing owners to repurpose or demolish them. Meanwhile, the financial strain is palpable—the delinquency rate for office-backed CMBS loans soared by 600 basis points in 2024, the sharpest rise since records began in 2000. To put that in perspective, this increase surpasses even the levels seen during the Global Financial Crisis. And it’s not slowing down: the first half of 2025 saw a mid-year jump of 280 basis points, a record-breaking pace that mirrors the accelerating occupancy crisis.
But here’s the part most people miss: amidst the doom and gloom, there are pockets of resilience. Take Manhattan’s Grand Central submarket, for example. Thanks to public-private partnerships aimed at creating a vibrant mixed-use corridor, office leasing has picked up, and vacancy rates have dropped nearly 100 basis points in the past year. Even older buildings, constructed before the 2000s, are outperforming the national average. This suggests that success isn’t just about shiny new properties—it’s about location, adaptability, and thoughtful urban planning.
As we look ahead to 2026, the national office market is expected to weaken further, with new vacancy records and rising delinquency rates. Yet, these headline numbers can obscure the nuanced stories of submarkets and properties that are thriving. The key to survival? Mixing land uses to create vibrant, foot-traffic-rich environments. Thoughtful zoning updates and strategic development partnerships between governments and private investors will likely determine which office markets—and which submarkets—emerge as the new centers of gravity.
But let’s end with a thought-provoking question: Is the traditional office space truly obsolete, or are we simply witnessing the birth of a hybrid model that blends remote work with dynamic, community-centric hubs? Share your thoughts in the comments—we’d love to hear your take on where the office market is headed.
