At A Glance
Commercial office space businesses show strong credit performance despite rising vacancies. Explore key trends shaping risk, demand, and resilience.
As we outlined in the May 5th Commercial Pulse Report, the commercial office space sector has been at the center of economic debate over the past several years. Headlines often focus on rising vacancies, remote work, and uncertainty around the future of office demand. But beneath these structural shifts lies a more nuanced—and in some ways unexpected—story.
Despite ongoing pressure on occupancy levels, commercial office space businesses are demonstrating notable financial resilience, particularly when viewed through the lens of commercial credit performance.
This divergence between market sentiment and underlying credit health is one of the most important dynamics emerging in today’s commercial landscape.
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A Sector Reshaped by Remote Work
The transformation of the office market can largely be traced back to the rapid adoption of remote work. Prior to the pandemic, remote workers accounted for just 6.5% of the workforce. That number surged to 35% during 2020 and has since stabilized at approximately 22%.
This shift fundamentally altered demand for office space.
Vacancy rates, which were at a low of 11.4% in late 2019, climbed steadily to a peak in 2025. While vacancy levels have begun to stabilize, they remain elevated compared to pre-pandemic norms. For many investors and lenders, this has raised valid concerns about long-term asset performance and cash flow stability.
However, vacancy rates alone do not tell the full story.
The Pricing Paradox: Rising Rents Amid Higher Vacancies
One of the more counterintuitive trends in the office sector is the continued rise in rental pricing. Even as vacancies increased, average asking rents have climbed to over $38 per square foot nationally.
This trend is largely being driven by geographic concentration of demand. Major metropolitan areas such as Manhattan and Miami continue to exhibit strong occupancy fundamentals, with vacancy rates below 15% and rental prices significantly exceeding national averages.
In effect, the office market is becoming increasingly bifurcated. High-demand, premium locations are maintaining pricing power, while other markets face more pronounced vacancy challenges.
For lenders and credit professionals, this reinforces the importance of market-level and asset-level differentiation when evaluating risk.
Credit Demand Is Normalizing
Another notable shift within the office space sector is how businesses are engaging with credit.
Historically, companies operating in this segment exhibited higher levels of credit demand compared to other industries. However, that gap has narrowed considerably in recent years. By early 2026, office space businesses are now seeking commercial credit at rates slightly below those of other sectors.
This normalization suggests a maturing post-pandemic environment, where businesses are adjusting to new operating conditions and capital needs.
It may also reflect more disciplined borrowing behavior as companies navigate uncertainty around long-term space utilization and revenue models.
A Distinct Credit Profile
Beyond overall demand, the composition of credit usage within the office space sector also stands out.
While commercial cards remain the most widely used credit product across industries, office space businesses show a greater reliance on term loans and lines of credit. At the same time, they maintain relatively lower exposure to commercial cards compared to their peers.
This distinction is meaningful.
Term loans and lines of credit are often associated with longer-term financing strategies and structured capital needs, whereas commercial cards tend to support shorter-term, operational expenses. The mix suggests that office space businesses may be taking a more strategic approach to capital management.
Stronger-Than-Expected Credit Performance
Perhaps the most compelling insight from the data is the sector’s risk profile.
Despite widespread concerns about office market fundamentals, businesses in this space are outperforming other industries on key credit metrics.
Late-stage delinquency rates for office space businesses are approximately 0.27%, compared to 0.70% for other industries—less than half the rate.
In addition, these businesses tend to maintain higher average commercial credit scores, further reinforcing the view that they represent a relatively lower-risk segment from a credit standpoint.
This combination of lower delinquency and stronger credit scores points to disciplined financial management across the sector, even amid structural disruption.
Reconciling Risk Perception vs. Reality
The disconnect between perceived risk and actual credit performance raises an important question: why does the sector still feel so risky?
The answer lies in the difference between structural market challenges and near-term financial behavior.
Elevated vacancy rates, evolving workplace trends, and uncertainty around long-term demand all contribute to a cautious outlook. These are legitimate concerns, particularly for asset valuations and long-duration investments.
However, current credit data suggests that many office space businesses are adapting effectively. They are managing debt responsibly, maintaining strong payment performance, and aligning their capital strategies with a changing environment.
For credit professionals, this highlights the need to balance macro-level narratives with granular, data-driven insights.
What to Watch Going Forward
- Remote work trends: Will hybrid and remote models continue to suppress demand, or stabilize at current levels?
- Operating cost pressures: Rising energy prices and inflation may impact both landlords and tenants, influencing margins and credit demand.
- Market bifurcation: Performance gaps between high-demand metros and weaker markets may widen, increasing the importance of localized risk assessment.
- Credit discipline: The sector’s strong credit performance will be tested if broader economic conditions weaken.
A Sector Defined by Transition—and Resilience
The commercial office space market is undeniably in transition. Structural changes driven by remote work have reshaped demand, and elevated vacancies remain a persistent challenge.
Yet, the data tells a more balanced story.
Strong rental performance in key markets, disciplined credit usage, and low delinquency rates all point to a sector that is more resilient than headlines might suggest.
For lenders, risk managers, and commercial credit professionals, the takeaway is clear: understanding today’s office market requires moving beyond surface-level indicators and focusing on the underlying financial behavior of businesses within the sector.
Because in this case, the credit data may be telling a very different story than the skyline.
Learn more
- ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis.
- ✔ Subscribe to our YouTube channel for regular updates on small business trends.
- ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow.
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Small business formation remains one of the more notable trends in the U.S. economy. In August 532,000 new businesses launched across the country. While that was down from July, it remained well above historical averages. Since July 2020, an average of 455,000 new businesses have opened each month—56% higher than the pre-pandemic monthly average in 2018 and 2019. But the national numbers only tell part of the story. Watch The Commercial Pulse Update Experian’s latest Commercial Pulse report analysis examines where this growth is occurring and what it means for the commercial credit market. The data show that the South has emerged as an important center of small-business growth. And the businesses driving that expansion tend to have a different profile from their counterparts in other regions. For commercial lenders, understanding those differences can provide valuable context when evaluating new opportunities, credit demand and portfolio risk. Business growth is shifting geographically New business formation has increased across all U.S. regions, but the pace has not been uniform. Prior to 2018, regional differences in growth were relatively modest. During the pandemic years of 2020 and 2021, the South led the country in new business application growth. Since 2022, the West has posted the strongest growth, while the South continues to account for the greatest volume of new business openings. One factor providing context for that growth is population. The population of the South has grown more than 7% since 2019. Since 2020 alone, the region has added more than 3.6 million residents, outpacing every other U.S. region. Meanwhile, populations in other parts of the country declined between 2020 and 2022 before beginning to recover. Business formation and population movement do not necessarily have a simple cause-and-effect relationship. But their parallel growth highlights how the geographic makeup of both consumers and businesses has been changing. Credit-active businesses are growing even faster in the South The shift becomes even clearer when looking at businesses using commercial credit. Experian data shows the number of credit-active businesses in the United States has increased 55% since 2018. Every region participated in that expansion, but the South experienced the greatest growth at 70%, followed by the North at 52%, West at 50% and Midwest at 36%. The South now represents approximately 39% of U.S. credit-active businesses. It also accounted for more than 40% of newly opened commercial accounts in 2026, compared with 37% in 2019. For commercial credit organizations, that means the South represents not just a growing population of businesses, but an increasingly significant share of businesses participating in the commercial credit ecosystem. Southern businesses tend to be smaller and younger The composition of this growth is just as important as its scale. Credit-active businesses in the South and West tend to skew smaller and younger than those in the North and Midwest. In the South, 53% of businesses generate less than $500,000 in annual revenue, while 59% have fewer than five employees. Only 36% have been operating for more than 10 years, compared with 43% in the Midwest. Those characteristics can influence how businesses interact with credit. A younger business, for example, may have had less time to establish multiple commercial credit relationships. That pattern appears in Experian’s data. Across the United States, the average number of commercial credit accounts per business has declined from approximately 1.8 in 2018 to 1.5 in 2026. The South experienced the steepest decline and currently has the fewest accounts per business. At the same time, commercial credit inquiries have increased since 2023, most recently peaking in early 2026. Inquiry rates have typically been higher in the Midwest and South. The combination of fewer existing accounts and elevated inquiry activity provides useful context for lenders seeking to understand the credit needs of a growing population of younger businesses. Credit utilization tells another part of the story Regional differences also appear after businesses establish credit relationships. Businesses in the Midwest and North opening new commercial accounts tend to receive higher lines than businesses in the South and West. At the same time, businesses in the South show higher commercial card utilization despite carrying somewhat lower average balances. Experian’s analysis points to lower credit lines as an important factor behind that relationship. These trends reinforce why looking beyond a single credit metric can be important. Higher utilization, for example, can take on additional context when considered alongside credit-line size, business age, balances and regional business formation. Growth brings opportunities—and risk factors to monitor Despite significant growth and changes in business composition, regional credit performance has remained relatively steady. Commercial delinquencies across all regions are near pre-pandemic levels, while commercial credit risk scores have been relatively stable. There are regional differences worth monitoring, however. Businesses in the South have lower average commercial credit scores than businesses in the other regions analyzed, and delinquency rates tend to be higher in the North and South than in the Midwest and West. The broader takeaway is not simply that there are more small businesses in the South. It is that the composition of the commercial market is evolving alongside that growth. The South represents a growing share of credit-active businesses and new commercial accounts. Many of those businesses are younger, smaller and have fewer established commercial credit relationships. Their credit needs and behaviors may therefore differ from those of more mature businesses in other parts of the country. For commercial lenders and risk leaders, understanding those distinctions can help provide greater context around acquisition, underwriting and portfolio management decisions. As small business formation continues, Experian will continue monitoring where that growth is occurring—and how the changing business landscape is showing up in commercial credit behavior. Learn more ✔ Visit our Commercial Insights Hub for in-depth reports and expert analysis. ✔ Subscribe to our YouTube channel for regular updates on small business trends. ✔ Connect with your Experian account team to explore how data-driven insights can help your business grow. Download the Commercial Pulse Report Visit Commercial Insights Hub Where are small businesses growing in the U.S.? Experian data points to significant growth in the South. While new business formation has increased across the country, the South has consistently recorded the highest volume of new business openings and has seen the number of credit-active businesses grow 70% since 2018—compared with 55% nationally. Where are small businesses growing the most? The South has consistently had the largest volume of new business openings. The South led application growth during 2020–2021, while the West has posted the strongest growth rates since 2022. That distinction is important because it prevents the SEO headline from overstating what the data shows. Why has small business growth been so strong in the southern U.S.? The South has added more than 3.6 million residents since 2020, substantially outpacing other regions. Our report establishes a correlation rather than causation. 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