In Q2 2024, office vacancy rates in Phoenix have risen significantly, with an increase of over 500 basis points since Q4 2019. The trend is expected to continue as pre-pandemic leases expire, with over 4 million square feet vacated since COVID-19, particularly in larger suites and single-tenant buildings. Sublease availability has tripled to 7.2 million square feet, while new construction has slowed. Rent growth has decelerated to 2.0%, with high vacancy rates, especially in 4 & 5 Star properties.
Despite a 50% decline in sales activity and lower leasing volumes, demand remains for smaller suites under 5,000 square feet. Sublease space offers rents about 20% lower than direct space. Phoenix’s employment growth is strong, supported by major investments from companies like TSMC and Intel, boosting the region’s economic outlook.
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