CoStar Forecasts Gradual Decline in U.S. Office Vacancy as Supply Contracts

Why this matters

CoStar’s forecast of a gradual decline in U.S. office vacancy amid contracting supply signals a potential inflection point in a sector long beleaguered by oversupply and shifting demand patterns. For institutional investors and lenders, this suggests a tentative rebalancing between available space and occupier requirements, which could underpin stabilization in rental income and valuations. The supply contraction likely reflects a slowdown in new completions and possibly increased conversions or demolitions, indicating that developers and owners are recalibrating expectations in response to persistent headwinds such as remote work trends and tenant downsizing. From a capital markets perspective, a tightening vacancy rate may ease some pressure on underwriting assumptions and loan-to-value ratios, potentially improving lending appetite and pricing for office assets. However, the gradual nature of the decline underscores that recovery remains uneven and dependent on localized demand drivers and broader economic conditions. Allocators should interpret this as a signal to differentiate within the office sector, focusing on markets and assets where supply constraints are most acute and tenant fundamentals are strongest, rather than expecting a broad-based rebound. Overall, the forecast highlights the evolving dynamics of office real estate as it adapts to post-pandemic realities.

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On the RET wire

• Disclosed office deal value tracked in August 2026: $4.6B across 17 reported transactions. All Office coverage →
• 18 stories mentioning CoStar on the wire in the past 90 days. CoStar coverage →

Computed from Real Estate Trail’s own tracked coverage

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