Phoenix Office Market Shows Signs of Stabilization Heading into 2026
The Phoenix office market is recovering. For the first time since the pandemic, vacancy rates are compressing year-over-year. Greater Phoenix recorded 1.1 million square feet of positive net absorption in 2025. Owner/user acquisitions, steady leasing activity, growing in-person attendance, and increased lease renewals all drove this growth. The overall vacancy rate improved from 16.7% to 16.3%. Phoenix now ranks among a handful of major U.S. markets to post an annual decline. New supply pressure is nearly absent — developers delivered just 2.1 million square feet over the past three years combined. That figure sits well below pre-pandemic norms, keeping oversupply firmly off the table.
The recovery remains uneven, and a long road lies ahead. Trophy buildings in premier submarkets are capturing the strongest demand and rent growth. Commodity suburban offices continue to struggle. Overall asking rent grew 2.6% over the past 12 months — below the rate of inflation. Factor in generous tenant improvement packages, and effective rent growth may actually be negative. Some landlords are responding by investing in renovations and spec suites. Others are demolishing or repurposing older, obsolete buildings for alternative uses like infill industrial. Premium inventory is shrinking. How quickly tenants migrate into next-tier buildings will define Phoenix’s broader recovery trajectory.
For a deeper dive into the evolving Phoenix office market — including detailed projections and expert analysis — view the full newsletter below. Download and share additional insights anytime.
