Office Market
The Phoenix office market remains challenged as companies continue reducing space and job growth in office-using sectors remains sluggish. Since COVID, over 5.5 million SF of office space has been vacated, surpassing losses seen during the Great Recession, with large suites and single-tenant buildings hit hardest. Demand is strongest for smaller spaces under 5,000 SF, while total leasing volume is down 15% from pre-pandemic levels. Sublease availability has surged to 6.9 million SF, making Phoenix the fourth most impacted market in the U.S. Limited new construction has helped moderate the imbalance, with only 260,000 SF completed in the past year, but it has also created a shortage of first-generation office space. Rent growth has slowed to 1.7% annually, and landlords continue offering generous tenant incentives. As pre-pandemic leases expire, occupancy and rents are expected to decline further in the near term.
| SUB-MARKET | TOTAL SF AVAILABLE | VACANCY RATE | MARKET RENT | NET ABSORPTION SF | UNDER CONSTRUCT SF |
|---|---|---|---|---|---|
| TOTAL: | 196M | 16.8% | $29.39 | 349K | 458K |
| 4 & 5 STAR | 71M | 26.2% | $33.92 | 611K | 305K |
| 3 STAR | 88M | 13.1% | $28.12 | -141K | 153K |
| 1 & 2 STAR | 37M | 7.6% | $23.61 | -120K | 0 |