The Phoenix office market is facing significant challenges, with vacancy rates steadily increasing since Q4 2019, a trend accelerated by the expiration of pre-pandemic leases and shifting tenant demand dynamics. This increase in vacancies is expected to continue as more leases expire, signaling a cautious approach from tenants regarding their office space needs.
Despite an overall decline in office occupancy surpassing the losses seen during the Great Recession, with a cumulative negative net absorption of over -4 million square feet, resilience remains in properties under 50,000 square feet and in the medical office sector. Phoenix ranks as the fourth most affected sublease market nationally, yet minimal new construction has helped mitigate some supply-demand imbalances.
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