Phoenix Office Market Rebounds to Pre-Pandemic Levels

The Greater Phoenix office market’s fourth quarter 2025 posted its strongest net absorption since the fourth quarter of 2019, totaling 531,893 square feet. The uptick in net absorption and 10-year low construction activity led to a decline in direct vacancy to 15.1 percent, according to a report released by Colliers.

Strong tenant demand pushed gross leasing to more than 1.0 million square feet during the fourth quarter. Leasing was dispersed throughout the market.

Direct vacancy fell 20 basis points year-over-year, ending at 15.1 percent. Available sublease space declined by 1.8 million square feet from year-end 2024, reducing the total availability rate by 140 basis points to 18.1 percent. A total of 4.9 million square feet are available for sublease, which marks the lowest level since fourth quarter 2021.

Construction activity hit a 10-year low, and conversions of non-performing office properties accelerated. Demolition began on multiple redevelopment projects, decreasing the total office inventory by more than 800,000 square feet. Currently, there are 564,057 square feet of office space under construction, with build-to-suit projects accounting for 75 percent of the total. Overall rental rates posted a small increase for the third consecutive quarter, rising 0.53 percent to $30.12 per square foot.