The second quarter national office vacancy declined 10 basis points (bps) year-over-year to 20.1%, marking the eighth straight quarter in which vacancy remained largely flat, according to a new data report from Cushman & Wakefield (NYSE: CWK).
Overall vacancy fell both quarter-over-quarter and year-over-year in 49 of the 92 markets tracked by Cushman & Wakefield Research. San Francisco, Orange County and Midtown Manhattan recorded the largest annual vacancy declines.
The report also noted that although net absorption totaled a modest negative 360,000 square feet during the second quarter, upward revisions to prior quarters pushed the four-quarter rolling total to a positive 14.3 million square feet (msf). This marked the seventh consecutive quarter of improvement and the strongest level since 2020.
Vacant sublease space fell 15.4% year-over-year to 95.6 msf and is now 28% below its peak from the first quarter of 2024, returning to levels last seen in early 2021. Available sublease space now represents 1.8% of total office inventory.
“The first half of 2026 reinforced that the office recovery is no longer confined to a handful of leading markets or trophy assets,” said David C. Smith, head of Americas Insights at Cushman & Wakefield. “Demand has improved for seven consecutive quarters, vacancy is beginning to decline across more than half of the markets we track, and the amount of available sublease space continues to shrink. While the recovery remains gradual, the underlying fundamentals are moving in the right direction across a much broader segment of the US office market.”
At the same time, new supply remains historically constrained. Office completions declined 24% year-over-year during the second quarter, reducing the four-quarter rolling total to 15.6 msf, the lowest level since 2012. The national construction pipeline totaled just 19.7 msf, or approximately 0.4% of total inventory, with only four markets maintaining development pipelines exceeding 2% of existing inventory.
“Looking ahead, we expect constrained new supply and a smaller inventory base to continue supporting gradual improvement across the office sector,” Smith added. “Occupiers remain disciplined in their leasing decisions, but the market is increasingly benefiting from healthier supply-demand dynamics that should support continued recovery through the balance of 2026.”
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