Phoenix Office Market Report

The following reflects Phoenix office market conditions as of Q2 2026.

MARKET DRIVERS

Phoenix’s office market posted 493,000 SF of positive direct net absorption in Q2 2026, with Northwest Phoenix leading all submarkets at 297,642 SF and Camelback Corridor the only submarket to post negative absorption, at -125,646 SF. Every property class recorded positive net absorption for the quarter, led by Class A at 314,317 SF and Class C at 113,547 SF. Sublet demand remained a significant driver of Class A performance, with 407,000 SF of sublet absorption accounting for more than half of Class A’s total net absorption of 721,700 SF.

Total leasing activity held steady at 1.5 million SF in Q2 2026. Average direct asking rents climbed to an all-time market high of $31.65 PSF FSG. Total vacancy across the market stood at 23.3%, a 100-basis-point improvement year-over-year. By class, vacancy stood at 28.1% for Class A, 18.4% for Class B, and 9.9% for Class C, with Class A also commanding the market’s highest average direct rate at $34.59 PSF FSG as tenants continue to favor highly amenitized buildings.

NEAR-TERM OUTLOOK

Hybrid work continues to reshape space needs across the Valley, as tenants shrink their footprints in favor of open, collaborative layouts. That trend is driving demand for move-in ready spec suites, letting tenants sidestep lengthy build-outs and rising tenant improvement costs, while giving landlords who continue to expand their spec suite inventory added leverage in lease negotiations.

Continued employer emphasis on in-office attendance is expected to sustain demand for high-quality, amenity-rich space, with tenant migration toward newer Class A buildings likely to continue as companies prioritize employee experience and operational efficiency. Backed by Phoenix’s population growth and diversified economy, long-term office demand is expected to strengthen gradually, with well-located Class A assets best positioned to outperform as fundamentals continue to stabilize.

Frequently Asked Questions

What is the Phoenix office vacancy rate in Q2 2026?

Phoenix’s total office vacancy rate was 23.3% in Q2 2026, down 100 basis points year-over-year, according to Kidder Mathews research. By class, Class A vacancy stood at 28.1%, Class B at 18.4%, and Class C at 9.9%. The improvement reflects steady positive net absorption across all three property classes during the quarter.

What is the Phoenix office availability rate in Q2 2026?

Phoenix’s total office availability rate was 24.7% in Q2 2026, down 160 basis points from a year earlier (Data source: CoStar). Availability includes both direct and sublet space marketed for lease, which is why it runs slightly higher than the market’s 23.3% vacancy rate.

What are average office asking rents in Phoenix, and how do they vary by submarket?

Average direct office asking rents in Phoenix reached an all-time high of $31.65 PSF FSG in Q2 2026, according to Kidder Mathews research. Rents ranged widely by submarket, from $19.69 PSF FSG in Mesa Downtown to $47.12 PSF FSG in Gateway Airport/Loop 202. Class A space commanded the market’s highest average rate at $34.59 PSF FSG, reflecting continued tenant demand for amenitized buildings.

How much office leasing activity occurred in Phoenix in Q2 2026?

Phoenix office leasing activity totaled 1,544,306 SF in Q2 2026, essentially flat with recent quarters but down 4.4% year-to-date compared to 2025 (Data source: CoStar). Scottsdale led all regions with 535,765 SF of quarterly leasing activity, followed by East Valley at 299,132 SF.

What is Phoenix’s office net absorption in Q2 2026, and what does it mean?

Phoenix recorded 492,625 SF of positive direct net absorption in Q2 2026, according to Kidder Mathews research. Net absorption measures the change in occupied office space, so a positive figure means tenants leased and moved into more space than they vacated during the quarter. Northwest Phoenix led all submarkets at 297,642 SF, while Camelback Corridor was the only submarket to post negative absorption, at -125,646 SF.

Is there new office construction underway in Phoenix in 2026?

No new office space was delivered to the Phoenix market in Q2 2026, according to Kidder Mathews research. With zero new deliveries for the quarter, existing supply and landlords’ expanding inventory of move-in ready spec suites are shaping tenant options across the market.

What was the largest office sale transaction in Phoenix in Q2 2026?

The largest office sale in Phoenix in Q2 2026 was the Apollo Corporate Headquarters, a three-property portfolio in the Airport Area submarket that sold for $103,000,000, or $171.76 per SF, according to Kidder Mathews research. LXP Industrial Trust purchased the 599,664-SF portfolio from EPIC, LLC.

What was the largest office lease transaction in Phoenix in Q2 2026?

The largest office lease signed in Phoenix in Q2 2026 was Consumer Cellular’s 123,340-SF direct lease at 8501 E Raintree Dr in Scottsdale Airpark with landlord Oaktree Capital Management, LP, according to Kidder Mathews research. The lease was executed in May 2026.

What is the outlook for the Phoenix office market?

The Phoenix office market is expected to keep strengthening gradually, with well-located Class A buildings best positioned to outperform, according to Kidder Mathews research. Continued employer emphasis on in-office attendance and Phoenix’s population growth are expected to support demand for high-quality, amenity-rich space, while tenants continue trading traditional layouts for smaller, more efficient footprints.

Last updated: Q2 2026. Data source: CoStar, AZ Commerce, Arizona Labor of Statistics, AZ Big Media, Phoenix Business Journal. Compiled by the Kidder Mathews Research Group.

Q2 2026 Phoenix Office Market: Key Data Points

Explore our full Phoenix office market review for deeper insights into leasing trends, sale activity, and submarket performance.

• Vacancy Rates Continue to Improve: Phoenix’s overall office vacancy rate declined to 23.3%, down 100 basis points year-over-year, while availability fell to 24.7%, down 160 basis points from a year ago.
• Positive Net Absorption Returns: The market recorded 492,625 SF of positive net absorption during 2Q 2026, led by Northwest Phoenix and strong Class A occupancy gains.
• Asking Rents Reach New High: Average direct asking rents increased to a record $31.65 PSF, representing a 2% year-over-year increase as tenants continued to favor premium office properties.
• Leasing Activity Remains Steady: Office leasing volume totaled 1.5M SF in 2Q 2026, demonstrating continued tenant demand despite ongoing workplace footprint optimization.
• Investment Sales Accelerate: Year-to-date office sales volume reached 2.75M SF, a 66% increase year-over-year, signaling renewed investor activity across the market.
• Class A Space Drives Demand: Class A properties accounted for 314K SF of positive net absorption in the quarter and achieved the market’s highest average asking rents at $34.59 PSF.

Submarket Statistics

Significant Sale Transactions Q2 2026

Significant Lease Transactions Q2 2026