Average U.S. office rents are higher than they were in the fourth quarter of 2019, even as the country's office market battles surging vacancy rates, a glut of sublease space and a wave of defaults.

The mean office rent in the country sits at $35.25 per SF, a slight increase from the $34.92 average rent in Q4 2019, The Wall Street Journal reports. The reason? Office owners are reluctant to cut rents, even keeping spaces intentionally vacant so as not to reduce the appraised value of the property.

Rent cuts to fill vacancies could spell trouble for office owners when their property values drop in turn, Newmark Group Head of Global Research David Bitner told the WSJ.

“This in turn could lead to a covenant default on their loans or at minimum would make it harder for them to refinance,” Bitner said.

Experts told the WSJ that the rent bubble will likely burst once owners and lenders are forced to sell distressed office assets or restructure mortgages. To justify high prices in the meantime, owners are funneling cash into top-notch tenant improvements and offering lengthy periods of free rent.

A recent JLL report found that certain amenities have a marked impact on how much rent owners are able to charge.

Buildings that feature a roof or sky terrace carry a 5.2% rent premium compared to other Class-A buildings in their submarket. Some of the other top amenities that drive an increase in rent include courtyards with outdoor seating, which come with a 3.5% rent boost, and LEED certification, which earns owners a 2.8% rent premium.

To entice tenants to sign leases they otherwise might not be able to afford, owners are comping many months of rent as well.

“I’ve even heard of a year of free rent for a 10-year lease term,” Phil Mobley, CoStar’s national director of office analytics, told the WSJ.

Rising average office rents have coincided with a massive amount of negative net absorption in the U.S. Since 2020, negative net absorption on office assets has totaled 200M SF, with experts projecting an additional 150M SF in the next two years, according to the WSJ.

This trend, coupled with an increasing number of distressed properties on the market, is starting to soften the office market and drive down rents for tenants in metros like San Francisco.

San Francisco, among the U.S. cities with the most distressed property sales, is already seeing a stark decline in asking rents, the WSJ reported. The average office asking rent plummeted from $75.93 in Q4 2019 to $53.78 per SF this quarter.

That market “has been quicker to adjust to the new reality,” Mobley told the WSJ.