In 2024, the U.S. office market continued its adjustment as sale prices declined while select asset types and regions showed early signs of stability. The latest CommercialEdge office report notes that the national average sale price dropped to $174 per square foot—an 11% decrease year-over-year—amid total transaction volumes reaching $374.9 billion. Although the decline was less severe than 2023’s 24% drop, the cumulative devaluation since 2019 now stands at 37%.

Notably, sale prices varied markedly by asset type and location. For instance, class A and A+ properties saw a 22% decline in 2024, contributing to a cumulative 47% decline since 2019. In contrast, Class B properties were relatively more stable, falling just 3% in 2024 and 20% cumulatively since 2019. At the same time, central business district (CBD) office buildings experienced a 28% decline in 2024 with values now down 60% since 2019. And, suburban office properties fell by 15%, while urban submarkets — defined as areas within a city center, but outside of the CBD — posted a modest, 7% increase in 2024, though they still remain 24% below 2019 levels.

“Many are speculating that office valuations have ‘bottomed out,’ which we agree with, in part. Highly amenitized buildings in desirable locations have likely seen the floor stabilized. However, the volume of distressed assets being sold as more buildings’ fates are determined still poses a threat to regional and national averages that we monitor.”

– Peter Kolaczynski, Director, CommercialEdge 

To that end, distressed asset sales played an increased role in 2024: Nearly 600 office buildings — more than one-third of all recorded transactions — sold below their previous values, which is a marked increase from the 386 discounted sales counted in 2023. More precisely, more than one-third of these properties exchanged hands at less than half of their prior sale price, and another third saw discounts exceeding 20%. But, the most striking example last year was 135 W. 50th St. in Manhattan, N.Y., which sold for $8.5 million — a 97% drop from its 2006 price of $332 million.

Aside from sales prices, the national vacancy rate stood at 19.7% at the end of January, up 180 basis points year-over-year as remote and hybrid work holds sway even amidst increased return-to-office mandates. Meanwhile, construction starts fell by 67% year-over-year with the national pipeline reduced to 50.8 million square feet under construction (0.7% of total stock).

Manhattan $4.9B Sales Lead, Despite Price-per-Square-Foot Decline

In the Northeast, the national sales drop was especially evident in Manhattan, N.Y. — the site of the largest annual decline in 2024 — decreasing by $488 per square foot. Nevertheless, its average sales price of $364 was the third-highest in the country, and it remains the most active market for office investment with a total sales volume of $4.9 billion in 2024, up $1.5 billion from 2023. Meanwhile, Boston maintained the largest construction pipeline at 7.3 million square feet, although it experienced a sharp decline from the previous year’s 14.5 million square feet.

In the South, Austin, Texas, and Miami posted the two highest sale prices nationally at $396 and $365 per square foot, respectively. In this case, Austin’s vacancy rate stood at 28% — second-highest nationally — and has grown by 690 basis points since December 2023, even as it led in construction activity as a percentage of stock at 3.7%. Miami, on the other hand, recorded a considerably lower vacancy rate of 15.6%.

In the West, San Francisco saw the fourth-highest sales prices at an average of $345 per square foot, while the Bay Area (separate from San Francisco) ranked fifth at an average of $288 per square foot. Both markets recorded some of the highest vacancy rates among major markets by the end of January: San Francisco’s vacancy rate reached 29.3%, marking a 560-basis-point increase year-over-year, and the Bay Area’s vacancy rate climbed to 26.3%, up by 640 basis points. Additionally, Los Angeles recorded strong transaction volumes of $3.2 billion and maintained a relatively low vacancy rate of 16.4%.

Conversely, Midwestern markets recorded the lowest average sale prices. Here, Chicago reported the second-lowest average sales price among major markets nationwide at $83 per square foot. Only Detroit was lower at an average of $81 per square foot. That said, Detroit’s office vacancies were relatively high at 23.8%, while Chicago’s (at 18.5%) sat slightly below the national average. Lastly, the Twin Cities in Minnesota recorded the lowest vacancy rate among major markets in the region at 15%.

For additional insights into all key office markets in the U.S., see CommercialEdge’s original report.