Phoenix Office Market Report

4th Quarter 2022

Posted In — Market Research | Market Report


LEASING ACTIVITY slowed considerably in the fourth quarter, down 35% from the same time last year dropping to a new record low in almost 15 years. Demand is strongest in regions such as Downtown, Tempe, and Chandler. Although these areas command some of the highest rents in the market, businesses are now targeting prime office buildings to attract and retain employees.

DESPITE THE SLOW RECOVERY of the office market, rents in Phoenix have rebounded more quickly than in many major metros. However, the continuous record levels of availability in sublease space are softening rent gains in key submarkets such as Downtown and Chandler.

CONSTRUCTION STARTS in the office market have slowed significantly in the past couple years, recording at a 10-year low with just 1.3M SF in the construction pipeline. The development slowdown will help reduce any supply-side risk in the near future.

SALES VOLUME IN 4Q posted at a 50% decrease YOY, drawing early speculation that the rise in the local interest rates and upcoming recession could have a negative impact on investments moving forward into the new year.


ACCORDING TO the Arizona Office of Economic Opportunity, Phoenix metro’s unemployment rate in November increased 20 basis points YOY to 3%. This is compared to the state’s adjusted rate of 4.1% and national rate of 3.7%.

THE AFFORDABILITY and diverse job prospects in the Valley have attracted many living in more dense and expensive cities. The labor market remains strong, although job growth is expected to decelerate in the coming year while population growth will continue to be one of the top in the nation.


THE FLIGHT to high-quality office space is a trend that will continue into the coming year. Companies are prioritizing employee proximity and focusing on plug-and-play buildings with attractive amenities.

THE PHOENIX METRO had the highest inflation rate in 2022 among the nation’s metro areas, although it experienced its first decrease in 14 months to 12.1% from 13% previously, while the national rate for October was 7.7%. The Phoenix market enters 2023 with cautious optimism, as inflation is expected to ease in the new year and interest rate increases may soften.

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