Office Market Update with Yardi Matrix

In this episode of America's Commercial Real Estate Show, host Michael Bull dives into the current state of the U.S. office market with Doug Ressler and Peter Glick from Yardi Matrix. The discussion centers on persistent vacancy rates—still between 55% and 60% of pre-COVID levels—driven by entrenched hybrid and remote work models, declining tenant demand, and a lack of full office return. Despite some upticks in gateway markets like New York, San Francisco, and select Sun Belt cities, overall occupancy remains stagnant. The experts highlight that office demand is no longer tied solely to headcount but is increasingly influenced by utilization, quality, and sustainability. They explore the slow but growing trend of building conversions, the rise of co-working as a flexible alternative, and the shrinking pool of viable office space due to functional obsolescence and demolitions. With new supply minimal and distressed assets mounting, the market is poised for a structural shift—less office space overall, but more high-quality, adaptive, and service-driven environments. The hosts conclude that this period of transition presents significant opportunities for investors, developers, and tenants who embrace innovation and flexibility. Key takeaways include: (1) Office occupancy remains below pre-COVID levels due to lasting hybrid work habits; (2) The future of office space lies in smaller, high-quality 'jewel box' buildings and repurposed assets; (3) Co-working and serviced flexible spaces are growing rapidly and will play a larger role as total office supply contracts; (4) Distressed properties and underutilized buildings present long-term investment opportunities; (5) AI may reduce future office demand by increasing productivity or replacing roles, accelerating the shift away from traditional office models; (6) Cities and states must reduce regulatory barriers to enable conversions and revitalization; (7) The next 3–5 years will likely see the lowest new office supply in decades, making it a strategic time to buy or lease; (8) The office sector is undergoing a transformation similar to retail’s evolution—less space, but smarter, more adaptive uses.