Phoenix Real Estate Market Reports

Phoenix Office Market

After turning positive for the first time in nine quarters, net absorption has turned negative again, contracting by 10,249 SF, signaling renewed challenges in the market. Recent job losses and the implementation of new tariffs have introduced uncertainty that clouds the market’s outlook. Total vacancy was 25.3%, up 10 basis points from the previous quarter. Hybrid work continues, based on the interplay of office-using employment with office occupancy. Before the pandemic, office occupancy increased 170 SF for every employee added. Now, Phoenix is contracting by 309 SF for every employee added. Sublease space continues to decline, with an accelerated transition to direct availability. This trend will persist in the coming quarters.

Phoenix Industrial Market

Quarterly net absorption was 5.7 MSF versus 3.3 MSF in construction deliveries. New supply additions are slowing as the construction pipeline empties. In a welcome change, total vacancy fell for the first time in seven quarters to reach 13.0%, down 13.7% from last quarter. Available sublease space increased, however, by 2.3% over the same period, to settle at 8.4 MSF. Under-construction activity decreased for the sixth consecutive quarter; 12.6 MSF is presently underway. Although construction is decreasing as expected, the market still has one of the most robust pipelines in the nation as it grows into a major hub. The average asking rent increased by 1.9% year over year as the market levels out.