The Phoenix office market posted its second straight quarter of positive absorption in Q1 2025, totaling 677,003 SF. Still, vacancy rose to 16.7%, the highest in 15 years, as pre-pandemic leases continue to roll off. Leasing demand remains focused on smaller, high-quality spaces, while sublease availability has grown to 6.8 million SF. Rent growth slowed to 1.6% year-over-year.
Office sales reached $1.7 billion over the past year, up from 2023 but still below pre-COVID levels. Most deals were under $5 million, led by private buyers and owner-users. New construction remains limited at 449,000 SF, helping curb oversupply. With vacancy expected to stay high, opportunities lie in repositioning well-located, discounted assets.
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