Office Real Estate Market Diverges by Quality as Orange County, San Diego Show Opposite Trends, Voit Reports

National office market forecasts predict stabilization in 2026, but individual building performance is expected to diverge sharply by asset quality and location, according to Voit Real Estate Services. The firm's analysis reveals a market fractured into distinct trajectories based on location, asset quality, tenant profile, and capital structure.

"What once behaved as a single asset class has fractured into distinct trajectories based on location, asset quality, tenant profile, and capital structure," writes Chris Drzyzga, SIOR, Senior VP/Partner of the Voit Irvine office, in his market analysis in the Orange County office market report. While that report focuses specifically on Orange County, the sentiment applies nationwide: "The narrative is no longer about recovery versus distress, but about viability versus obsolescence."

Southern California Markets Show Sharp Divergence

The bifurcation is evident in Southern California's two major office markets. Orange County saw a 152 basis points year-over-year drop in vacancy, while San Diego experienced a 161 basis points year-over-year increase, according to Voit data.

Nationally, the vacancy rate peaked in March 2025 and has since fallen 150 basis points to 18.4%, according to a January 2026 National Office Report by Yardi Matrix. Seventeen of the top 25 metros saw vacancy rates decrease throughout 2025, but others saw significant increases. Manhattan, San Francisco, the Bay Area, and Houston all saw vacancy reductions of 300 basis points or more, while Orlando increased 310 basis points, Nashville rose 140 basis points, and Washington, DC climbed 120 basis points.

Hospitality-Level Amenities Become Essential Drivers

The trend has fueled a "flight to quality," in which premium, highly amenitized spaces outperform older, commodity buildings—many of which are nearing functional obsolescence. One key component for increasing occupancy rates for landlords of Class A properties has been a focus on hospitality-level amenities.

In recent years, office amenities have been shifting from "nice-to-have" perks to essential drivers of occupancy. These include health and wellness initiatives such as onsite gyms and healthy food options, collaboration spaces, quiet zones, technology-enabled meeting rooms, sustainability features including green certifications such as BREEAM, LEED, and WELL, and hospitality-like convenience services including daycare and concierge services.

While these amenities require increased investment on the part of the landlord, multiple studies indicate that this investment increases ROI through double-digit rent premiums and higher tenant retention, as tenants can use their space to attract and retain high-quality talent.

Market Outlook: Building-by-Building Performance

The brokerage community emphasizes that this bifurcation doesn't just vary from market to market—it's building-by-building. The assessment suggests that premium office properties with hospitality-level amenities will continue to outperform commodity buildings as the market stabilizes in 2026.

Voit's analysis indicates that the office market is no longer experiencing a uniform recovery or distress pattern, but rather a fundamental restructuring based on asset viability and tenant demand for high-quality, amenitized space.

Sources

Voit Real Estate Services