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.
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