U.S. Office Vacancies Hit New Record in Q4 2004

The national office vacancy rate hit a new record at 20.4% in the fourth quarter of 2024, with average effective rents increasing by 0.1%, Moody’s CRE said in its Q4 2024 Preliminary Trend Announcement. The sector suffered a total of 80 basis points of vacancy increase last year, with 30 bps registered in Q4 alone.

“Five years since the adoption of the widespread hybrid and remote working models, a new regime is forming which has led to a permanent reduction in office demand,” wrote Moody’s CRE analysts Thomas LaSalvia, Lu Chen, Nick Luettke, David Caputo and Mike Pellegrini. “More flexible or shorter office leases meant pre-pandemic rollover has now fused with early-pandemic lease rollover throughout 2024, driving more volatilities in future office performance.”  

On the brighter side, Moody’s CRE noted that “the emerging trend of popular in-person working days and stabilizing return-to-office rate suggest firms may only be able to reduce their footprint to a certain extent before moving toward a new equilibrium.” Its end-of-year outlooks for the apartment, retail and industrial sectors were more upbeat.

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