The following reflects Phoenix office market conditions as of Q3 2026.
MARKET DRIVERS
The Phoenix office market recorded 23.6K SF of positive direct net absorption in 3Q26. Central Corridor recorded the highest positive net absorption at 105.6K SF, while East Phoenix saw the lowest, with negative net absorption of 64.6K SF. Class A recorded a direct net absorption of 48,820 SF and Class C posted 14,036 SF, both positive for the quarter, while Class B posted negative 39,236 SF.
Sublet demand remained strong, with Class A sublet absorption totaling 40.3K SF, accounting for just under half of total Class A net absorption of 89.2K SF.
Total leasing activity totaled 1.3M SF in 3Q26, down from the prior quarter. Average direct rates held at $31.66/SF FSG, representing a 2% increase year over year. Total vacancy stood at 23.7% in 3Q26, down just 10 bps from both last quarter and the same period last year. Class A total vacancy stood at 28.3%, Class B at 18.5%, and Class C at 11.1%, with all three class types remaining relatively consistent with the prior quarter. Class A rates continue to lead average direct rental rates at $34.50/SF FSG, reflecting the premium associated with Class A office product.
NEAR-TERM OUTLOOK
The Phoenix office market is continuing to move toward stabilization, with office-using employment increasing 1.3% year over year in July, the strongest annual growth since mid-2022. As employment grows, developers are taking a more selective approach to new office investment, with greater emphasis on renovating and repositioning existing properties.
Limited new office development and the potential removal or repositioning of older, underperforming buildings could gradually reduce available inventory. As available space becomes more limited, competition is likely to increase for well-located, updated properties, particularly those offering modern amenities and flexible space. Properties that can adapt to evolving tenant needs are likely to remain better positioned to attract and retain demand, while older commodity space may continue to face a slower recovery.
Frequently Asked Questions
What is the office vacancy rate in Phoenix in Q3 2026?
The total office vacancy rate in Phoenix was 23.7% in Q3 2026, according to Kidder Mathews research. That is down 10 basis points from both Q2 2026 (23.8%) and Q3 2025 (23.8%). By class, Class A vacancy was 28.3%, Class B was 18.5%, and Class C was 11.1%. (Data source: CoStar)
What is the office availability rate in Phoenix in Q3 2026?
The total office availability rate in Phoenix was 24.4% in Q3 2026, down from 25.1% in Q2 2026 and 25.4% in Q3 2025, a decline of 100 basis points year over year. Direct availability stood at 20.5% and sublet availability at 4.0%, according to Kidder Mathews research. (Data source: CoStar)
How much office leasing activity occurred in Phoenix in Q3 2026?
Phoenix recorded 1,296,066 SF of office leasing activity in Q3 2026, according to Kidder Mathews research. Year-to-date leasing activity totaled 4,205,080 SF, down 12.2% from 4,788,946 SF in the same period of 2025. Leasing activity declined from the prior quarter. (Data source: CoStar)
What was office net absorption in Phoenix in Q3 2026?
Phoenix recorded positive direct net absorption of 23,620 SF in Q3 2026, according to Kidder Mathews research. Net absorption measures the change in occupied space over a period, so a positive figure means more space was taken than vacated. Year-to-date net absorption was negative 156,525 SF, compared with positive 392,459 SF through the same period in 2025. (Data source: CoStar)
Which Phoenix office submarkets had the strongest and weakest net absorption in Q3 2026?
Camelback Corridor posted the strongest submarket net absorption at 199,337 SF in Q3 2026, followed by Midtown at 130,810 SF. The 44th Street Corridor was weakest at negative 249,847 SF. At the regional level, Central Corridor led with 105,601 SF while East Phoenix was lowest at negative 64,578 SF, according to Kidder Mathews research. (Data source: CoStar)
What are average office asking rents in Phoenix in Q3 2026?
The average direct office asking rent in Phoenix was $31.66 per SF per year (full service gross) in Q3 2026, up 2% from $31.15 in Q3 2025 and roughly flat with $31.69 in Q2 2026, according to Kidder Mathews research. Submarket averages ranged from $19.36 in Mesa Downtown to $50.38 in Gateway Airport/Loop 202, with Camelback Corridor at $43.75. (Data source: CoStar)
How do Class A, B, and C office vacancy and rents compare in Phoenix in Q3 2026?
Class A office space had the highest vacancy and the highest rents in Phoenix in Q3 2026, according to Kidder Mathews research. Class A vacancy was 28.3% with average direct rents of $34.50 per SF full service gross, compared with 18.5% and $26.35 for Class B and 11.1% and $21.77 for Class C. (Data source: CoStar)
How much new office space was delivered in Phoenix in Q3 2026?
Phoenix recorded 0 SF of new office deliveries in Q3 2026, unchanged year over year, according to Kidder Mathews research. Developers are taking a more selective approach to new office investment, with greater emphasis on renovating and repositioning existing properties. (Data source: CoStar)
What was the largest office sale in Phoenix in Q3 2026?
The largest office sale in Phoenix in Q3 2026 was Camelback Esplanade III in the Camelback Corridor, which sold for $86,000,000, or $387.67 per SF, for 221,836 SF. Southwest Value Partners purchased the property from Esplanade III Owner, LLC. Phoenix office sales volume totaled 469,574 SF for the quarter and 3,176,575 SF year to date, up 14.9% from 2025, according to Kidder Mathews research. (Data source: CoStar)
What were the largest office lease transactions in Phoenix in Q3 2026?
The largest office lease in Phoenix in Q3 2026 was 90,924 SF at The Alameda in Tempe, a direct lease signed in August 2026. The next largest was 84,262 SF at Three Gateway in the 44th Street Corridor, a direct lease signed in July 2026. A 42,000 SF sublease at State Farm – Bldg D in Tempe followed, according to Kidder Mathews research. (Data source: CoStar)
What is the outlook for the Phoenix office market after Q3 2026?
Kidder Mathews research expects the Phoenix office market to continue moving toward stabilization. Office-using employment rose 1.3% year over year in July, the strongest annual growth since mid-2022, while limited new development and the repositioning of older buildings could gradually reduce available inventory. Well-located, updated properties with modern amenities and flexible space are likely to see rising competition, while older commodity space may face a slower recovery. (Data source: CoStar)
Last updated: Q3 2026. Data source: CoStar, AZ Big Media, U.S. Bureau of Labor Statistics, Yardi Research. Compiled by the Kidder Mathews Research Group.
Q3 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.
- Total vacancy: The total vacancy rate was 23.7% in Q3 2026, down 10 bps from both Q2 2026 and Q3 2025, while total availability fell 100 bps year over year to 24.4%.
- Net absorption: Direct net absorption was positive 23,620 SF for the quarter, though year-to-date net absorption remained negative at 156,525 SF.
- Leasing activity: Leasing totaled 1,296,066 SF in Q3 2026 and 4,205,080 SF year to date, down 12.2% from the same period in 2025.
- Asking rents: The average direct asking rate was $31.66/SF FSG, up 2% year over year, led by Class A at $34.50/SF FSG.
- Sale volume: Sales totaled 469,574 SF in the quarter and 3,176,575 SF year to date, up 14.9% from 2025.
- Largest sale: Camelback Esplanade III in the Camelback Corridor sold for $86,000,000 ($387.67/SF) for 221,836 SF.
- New deliveries: No new office space was delivered in Q3 2026 (0 SF), unchanged year over year.
Submarket Statistics
| Submarket | Total Inventory (SF) |
Total Vacancy Rate |
Sublet Available Rate |
Direct Available Rate |
Total Available Rate |
3Q26 Direct Net Absorption (SF) |
3Q26 Leasing Activity (SF) |
Average Direct Rental Rate (FS) |
|---|
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Airport Area | 4,254,765 | 27.7% | 13.8% | 14.5% | 28.3% | -9,397 | 9,557 | $22.46 |
| South Tempe/Ahwatukee | 3,824,853 | 20.2% | 4.5% | 19.1% | 23.6% | 24,703 | 22,146 | $29.95 |
| Airport | 8,079,618 | 24.1% | 9.4% | 16.7% | 26.1% | 15,306 | 31,703 | $26.78 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Downtown | 8,261,230 | 30.4% | 1.0% | 19.9% | 20.8% | -25,209 | 112,490 | $33.96 |
| Midtown | 9,029,270 | 27.2% | 0.6% | 33.0% | 33.6% | 130,810 | 66,066 | $25.98 |
| Central Corridor | 17,290,500 | 28.7% | 0.8% | 26.7% | 27.5% | 105,601 | 178,556 | $28.21 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| 44th Street Corridor | 2,132,884 | 39.8% | 5.0% | 32.1% | 37.1% | -249,847 | 129,907 | $29.16 |
| Camelback Corridor | 7,277,558 | 20.1% | 1.7% | 17.7% | 19.4% | 199,337 | 200,165 | $43.75 |
| Midtown/Central Phoenix | 2,271,042 | 9.4% | 0.7% | 9.3% | 10.1% | -14,068 | 8,411 | $21.18 |
| East Phoenix | 11,681,484 | 21.6% | 2.1% | 18.7% | 20.8% | -64,578 | 338,483 | $37.13 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Chandler | 7,115,265 | 22.6% | 7.6% | 21.4% | 29.1% | -40,627 | 81,841 | $34.00 |
| Gateway Airport/Loop 202 | 184,336 | 7.0% | 0.0% | 6.0% | 10.5% | -6,418 | 5,981 | $50.38 |
| Mesa Downtown | 536,383 | 13.3% | 0.0% | 13.9% | 13.9% | -6,418 | 1,406 | $19.36 |
| Mesa East | 1,020,033 | 34.4% | 0.3% | 35.0% | 35.4% | 224 | 10,709 | $38.70 |
| Superstition Corridor | 2,043,432 | 25.3% | 1.5% | 25.2% | 26.7% | 31,897 | 37,797 | $23.78 |
| Tempe | 13,555,269 | 24.3% | 8.4% | 17.5% | 25.9% | -66,160 | 208,105 | $34.38 |
| East Valley | 24,454,718 | 24.0% | 7.0% | 19.9% | 26.9% | -40,365 | 345,839 | $33.13 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Paradise Valley | 1,537,359 | 22.7% | 4.0% | 20.3% | 24.3% | -4,253 | 29,381 | $34.75 |
| Piestewa Peak Corridor | 1,710,364 | 28.4% | 4.0% | 27.7% | 31.8% | -5,913 | 8,624 | $29.60 |
| North Phoenix | 3,247,723 | 25.7% | 4.0% | 24.2% | 28.2% | -10,166 | 38,005 | $32.63 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Arrowhead | 600,224 | 14.0% | 3.6% | 16.1% | 19.8% | -8,668 | 6,544 | $32.81 |
| Deer Valley/Airport | 4,574,965 | 32.6% | 3.7% | 25.8% | 29.6% | 14,056 | 44,804 | $30.43 |
| North I-17 | 64,473 | 47.1% | 0.0% | 47.1% | 47.1% | 0 | 0 | $32.00 |
| Northwest Phoenix | 4,071,553 | 28.5% | 0.8% | 21.7% | 22.4% | -17,943 | 20,198 | $24.54 |
| Northwest Phoenix | 9,311,215 | 29.7% | 2.4% | 23.5% | 25.9% | -12,555 | 71,546 | $27.75 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Central Scottsdale | 4,790,183 | 17.2% | 8.3% | 15.2% | 23.5% | 20,024 | 46,983 | $32.93 |
| N Scottsdale/Carefree | 226,269 | 15.6% | 1.4% | 7.3% | 8.7% | 19,924 | 7,888 | $25.07 |
| Scottsdale Airpark | 8,351,243 | 14.4% | 1.3% | 16.8% | 18.1% | -32,026 | 145,741 | $34.80 |
| Scottsdale South | 4,595,827 | 23.4% | 1.2% | 21.1% | 22.2% | -18,908 | 72,419 | $41.59 |
| Scottsdale | 17,963,522 | 17.5% | 3.1% | 17.3% | 20.5% | -10,986 | 273,031 | $36.20 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Glendale | 1,247,964 | 25.2% | 0.0% | 12.2% | 12.2% | 27,404 | 11,306 | $35.51 |
| Loop 303/Surprise | 267,118 | 6.9% | 1.1% | 6.9% | 8.0% | 12,695 | 0 | $35.00 |
| Southwest Phoenix | 1,171,070 | 13.0% | 0.0% | 13.0% | 13.0% | 0 | 0 | $29.50 |
| West I-10 | 625,975 | 13.6% | 0.4% | 13.2% | 13.5% | 1,264 | 7,597 | $35.96 |
| West Phoenix | 3,312,127 | 17.2% | 0.2% | 12.2% | 12.4% | 41,363 | 18,903 | $33.86 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Total | 95,340,907 | 23.7% | 4.0% | 20.5% | 24.4% | 23,620 | 1,296,066 | $31.66 |
| Submarket | Total Inventory (SF) | Total Vacancy Rate | Sublet Available Rate | Direct Available Rate | Total Available Rate | 3Q26 Direct Net Absorption (SF) | 3Q26 Leasing Activity (SF) | Average Direct Rental Rate (FS) |
|---|---|---|---|---|---|---|---|---|
| Class A | 54,466,510 | 28.3% | 4.9% | 23.0% | 27.9% | 48,820 | 1,035,006 | $34.50 |
| Class B | 35,615,329 | 18.5% | 2.6% | 18.6% | 21.2% | -39,236 | 249,789 | $26.35 |
| Class C | 5,239,068 | 11.1% | 3.0% | 6.7% | 9.7% | 14,036 | 11,271 | $21.77 |
Significant Sale Transactions 3Q26
| Property | Submarket | SF | Sale Price | $/SF | Buyer | Seller |
|---|---|---|---|---|---|---|
| Camelback Esplanade III | Camelback Corridor | 221,836 | $86,000,000 | $387.67 | Southwest Value Partners | Esplanade III Owner, LLC |
| Surprise Office Center | Loop 303/Surprise | 54,735 | $13,400,000 | $244.82 | Woodside Health | XCD Realty |
| Three Scottsdale Landing | Scottsdale Airpark | 81,000 | $10,270,000 | $126.79 | Envita Medical Centers of America | Wentworth Property Co. |
| 702 E Osborn Rd | Midtown/Central Phoenix | 35,346 | $6,800,000 | $192.38 | AZ E Osborn, LLC | 702 East Osborn, LLC |
| 19th Ave Corner Offices | Deer Valley/Airport | 28,479 | $5,175,000 | $181.71 | Austin Property Mgmt. | 1838 West Parkside Lane, LLC |
Significant Lease Transactions 3Q26
| Property | Submarket | SF | Transaction Date | Landlord | Lease Type |
|---|---|---|---|---|---|
| The Alameda | Tempe | 90,924 | August 2026 | Ascent Real Estate Advisors, LLC | Direct |
| Three Gateway | 44th Street Corridor | 84,262 | July 2026 | Western Alliance Bank | Direct |
| State Farm – Bldg D | Tempe | 42,000 | September 2026 | JDM Partners, LLC | Sublet |
| Park Place South | Chandler | 33,200 | August 2026 | Jon Hancock Real Estate | Sublet |
| One Gateway | 44th Street Corridor | 24,698 | July 2026 | Western Alliance Bank | Direct |
Data as of Q3 2026. Source: CoStar, AZ Big Media, U.S. Bureau of Labor Statistics, Yardi Research. Prepared by the Kidder Mathews Research Group.
ContactGARY BARAGONA |
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