— By Jason Price of Commercial Properties Inc./CORFAC International —
The Phoenix office market continues to show balance as leasing patterns shift and tenants prioritize smaller footprints. The metro’s office inventory totals 195.5 million square feet across roughly 9,000 buildings. Construction has edged upward year over year, with a little more than 900,000 square feet currently underway compared with 844,000 square feet a year ago. Another 1.5 million square feet is expected to deliver between 2025 and 2026, a restrained pace that should help prevent oversupply.
This discipline has become critical as companies continue to right-size and lenders remain cautious. The overall market faces slower demand for large contiguous blocks, limited financing availability and an elevated level of sublease inventory that will take time to absorb. Most of the sublease space consists of second-generation Class A and B product in downtown and the Camelback Corridor, where tenants are evaluating long-term space requirements before recommitting.
Even so, Phoenix’s fundamentals remain relatively healthy compared with many other metros. The city’s diversified economy, steady population inflow and expanding employment base continue to support leasing activity, particularly for move-in-ready suites of less than 10,000 square feet. Small-business confidence and the return-to-office movement among local professional firms are driving this segment, with suburban submarkets like Scottsdale Airpark, Chandler and Deer Valley seeing consistent deal flow.
Landlords are focusing on targeted reinvestment rather than large-scale redevelopments. Lobby upgrades, shared amenities, refreshed outdoor areas and sustainability improvements are helping older assets remain competitive. This selective spending aligns with the market’s broader flight to quality, as newer or renovated buildings continue to outperform in both rent levels and occupancy.
Vacancy remains elevated but stable, hovering near 23 percent, per Colliers, while direct asking rents for Class A space average $32 per square foot (full-service gross). Sublease availability totals about 5 million square feet, yet absorption in smaller suites and newly delivered buildings has tempered upward pressure on vacancy.
Looking ahead, the Valley’s limited construction pipeline and steady small-tenant demand should provide a floor for market fundamentals. While large-block leasing will take time to recover, Phoenix’s measured development activity, expanding talent pool and continued corporate in-migration leave it well-positioned to regain momentum as economic conditions improve.
— By Jason Price, Executive Director of Marketing and Research, Commercial Properties Inc./CORFAC International. This article was originally published in the October 2025 issue of Western Real Estate Business.