Office Market
Phoenix’s office market remains under pressure as users continue to reduce space and job growth in office-using sectors lags. Since COVID, more than 5.5 million SF has been vacated—exceeding losses seen during the Great Recession—with large suites and single-tenant buildings hardest hit. Demand is holding for smaller spaces under 5,000 SF, but total leasing volume is down 15% from pre-pandemic levels due to shrinking average lease sizes. Sublease availability has surged to 6.9 million SF, making Phoenix one of the most impacted sublease markets in the U.S. Limited new construction—just 150,000 SF delivered in the past year—has helped avoid a more severe imbalance but has also reduced availability of premium, first-generation space. Rent growth has slowed to 1.5% annually, with generous concessions remaining widespread. As pre-pandemic leases expire, further declines in occupancy and rent growth are anticipated in the near to midterm.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 195M | 16.9% | $29.36 | -337K | 657K |
| 4 & 5 STAR | 71M | 26.8% | $33.86 | -165K | 155K |
| 3 STAR | 89M | 12.8% | $28.13 | -165K | 155K |
| 1 & 2 STAR | 36M | 7.4% | $23.55 | -7K | 0 |