Vacancy rates for office buildings have been steadily increasing, up 150 basis points throughout 2024 to reach 19.8% by the end of the year, according to the latest Yardi Matrix National Office Report.

Kastle’s Back to Work Barometer shows that average attendance for offices sits at 54% as utilization has been flat for the last two years.

"The wave of distress anticipated since the height of the pandemic has begun to materialize," the report states. "Large urban properties are now feeling the pinch as demand continues to fall and lease contracts come to an end."

Office Distress Picks Up

Last year saw 25 million sf of office transactions in distress, according to the Yardi Matrix report. This is a 39% increase from the previous three-year average of 18 million sf.

The average property size for distressed transactions rose 30% in 2024 to more than 200,000 sf: "A trend suggesting that large properties are increasingly vulnerable," the report states.

Chicago, Ill., led the country in distressed transactions with 26 in 2024 (two more than in 2023).

"While the outlook of the office sector looks gloomy in the near term, opportunities to adjust will present themselves as the uncertainty looming over the sector lifts and things begin to move," Yardi Matrix writes.

To read the full report, visit Yardi Matrix.