Office Market
The Phoenix office market has reached a tentative turning point as vacancy edges down to 16.3% following four consecutive quarters of positive absorption. Demand has improved due to increased renewals, owner-user acquisitions, and steadier in-person attendance, though overall leasing volumes remain below pre-COVID norms. With virtually no new supply—less than 600,000 SF delivered in the past year—space options in premier buildings are tightening, driving rent gains at the top end even as overall asking rents grow a modest 2.2%. Non-premium suburban product continues to struggle, and elevated sublease availability remains a headwind. Roughly 5.5 million SF of pandemic-era occupancy losses still need to be backfilled, and economic uncertainty tempers the outlook. Recovery is expected to be gradual, with improvement led by a shrinking pool of high-quality space.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 194M | 16.3% | $30.20 | -85K | 921K |
| 4 & 5 STAR | 71M | 24.6% | $34.57 | 454K | 560K |
| 3 STAR | 88M | 13.3% | $29.10 | -561K | 362K |
| 1 & 2 STAR | 36M | 7.1% | $24.13 | 22K | 0 |