Office Vacancies Climb: Your Lease Renewal Just Got Tougher

February 22, 2026

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Office Vacancies Climb: Your Lease Renewal Just Got Tougher

The office market is sending mixed signals. Vacancy rates remain elevated even as some metros show signs of recovery, and entrepreneurs staring down lease renewals face a paradox: landlords holding firm on pricing despite empty floors.

The numbers tell a story of slow stabilization rather than collapse, but that nuance makes negotiating your next lease far more complicated than simply waving vacancy data in front of your property manager.

The Market Numbers Tell a Split Story

National office vacancy stood at 18.4% as of December 2025, down 1.4% year-over-year but still far above pre-pandemic norms. By January 2026, the rate dipped further to 18.2%, a 150 basis point annual decline that signals modest momentum without dramatic recovery.

Regional divergence matters more than the national average. Austin’s vacancy rate hit 26.8% while Seattle reached 26.6% in late 2025, compared to Manhattan’s improved 13.4%, down 310 basis points year-over-year. Sixteen of the top 25 metros posted gains in late 2025, yet outliers like San Francisco remained stuck above 26%.

The market has stabilized without healing. Supply is easing through reduced construction, with the national pipeline at just 0.5% of existing stock, and office-to-residential conversions are pulling distressed properties offline. Demand turned modestly positive after recent losses, though remote and hybrid work patterns continue to suppress absorption.

Why Landlords Aren’t Backing Down

Higher vacancies should translate to tenant leverage, but economics work both ways. Building maintenance costs don’t scale down with occupancy. Mortgage obligations don’t shrink when floors sit empty.

Landlords face pressure to fill space without triggering comparable rent reductions across their portfolios, creating a standoff even in softening markets. Class C properties face the hardest hit, with elevated vacancies persisting as tenants flee aging buildings for modern amenities. Premium properties recovered faster by attracting flight-to-quality tenants willing to pay for upgraded space.

Ameriprise Financial’s exit from its 1 million square foot Minneapolis headquarters drove Twin Cities vacancies up 190 basis points to 17.8% in November 2025, illustrating how single corporate decisions ripple through metro markets. Rent growth has softened regionally but hasn’t reversed, leaving entrepreneurs caught between static pricing and visible empty inventory.

The disconnect creates an unpredictable negotiating landscape where leverage exists but requires strategic deployment.

Strategic Moves for Renewal Negotiations

Timing matters more in this environment than in stable markets. Starting conversations six to nine months before your lease expires gives you room to explore alternatives and signals seriousness without desperation.

Entrepreneurs should request concessions beyond base rent, including:

Tenant improvement allowances for build-outs
Expansion options tied to growth milestones
Flexibility clauses that accommodate hybrid schedules
Sublease rights to manage excess space

Benchmarking comparable spaces in your submarket establishes negotiating boundaries grounded in current reality rather than your landlord’s projections. NAIOP forecasts suggest demand could align with pre-pandemic patterns within eight quarters, though they equally weight scenarios where sustained remote work hampers recovery.

That uncertainty means landlords may value retention over replacement.

Consider relocation as leverage even if you don’t intend to move. Touring competitive buildings and obtaining preliminary proposals demonstrates alternative options exist. Landlords prefer negotiating with current tenants over marketing vacant space, shouldering broker commissions, and gambling on unknown occupants.

Next Moves for Entrepreneurs

The window for favorable terms exists now but won’t remain open indefinitely as markets normalize. Entrepreneurs should:

Audit current lease terms to identify upcoming deadlines and option exercise dates
Gather market data specific to their building class and submarket rather than national averages
Schedule early conversations with landlords before formal renewal notices trigger rushed decisions
Consider engaging a tenant-focused real estate advisor for complex negotiations

Complex negotiations may warrant engaging a tenant-focused real estate advisor who understands local market dynamics and landlord financial pressures. The combination of elevated vacancies and modest recovery creates temporary leverage for prepared tenants.

Market conditions are tougher but more negotiable for entrepreneurs who treat renewals as strategic business decisions rather than administrative deadlines.