CoStar projects gradual decline in U.S. office vacancy

Why this matters

CoStar’s projection of a gradual decline in U.S. office vacancy signals a tentative shift in a sector long beleaguered by pandemic-induced structural challenges. For institutional investors and lenders, this forecast suggests a potential easing of one of the most persistent overhangs on office fundamentals. While vacancy remains elevated relative to pre-pandemic norms, a downward trajectory implies improving demand or at least a stabilization in absorption trends, which could support underwriting assumptions and portfolio valuations. This outlook also reflects evolving capital flows. After a period marked by retrenchment and heightened risk aversion toward office assets, a projected vacancy decline may encourage a cautious re-engagement by institutional capital, particularly from value-add and opportunistic funds seeking to capitalize on discounted entry points. Lenders may similarly recalibrate risk premiums and loan-to-value ratios if vacancy pressures moderate, potentially unlocking incremental financing capacity. However, the gradual nature of the decline underscores persistent headwinds, including hybrid work models and tenant downsizing, which continue to temper market recovery. Allocators should interpret CoStar’s projection as a signal of slow normalization rather than a swift rebound, reinforcing the need for selective exposure and rigorous asset-level underwriting in office portfolios.

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On the RET wire

• Disclosed office deal value tracked in August 2026: $17.1B across 72 reported transactions. All Office coverage →
• 10 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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