View of the Phoenix Medical Office Market
Market Highlights
- Total medical office inventory: 16.8M SF
- Medical office space leased in 2Q25: 226.7K SF
- 2Q25 sales volume: $72.5M
Leasing Activity
Direct vacancy rose to 15.7%, reflecting the continued impact of high construction costs and cautious economic conditions. Despite steady demand and strong fundamentals, leasing velocity has been tempered by limited tenant expansion, hospital system activity and increased space availability.
Sales Activity
Sales remained active but fell by $25.9 million compared to Q1. While buyer interest is still present, elevated interest rates and tighter underwriting standards continue to weigh on deal flow and pricing. On the sell side, many owners are holding off, waiting for clearer signs of a Federal Reserve pivot before bringing assets to market, contributing to constrained inventory.
Construction
For the first time this year, the market saw 148,000 square feet of new deliveries. Although this breaks the streak of no ground-up completions, overall development remains constrained. Adaptive reuse continues to play a role, with office-to-medical conversions and landlord flexibility helping to absorb demand.
Market Breakdown
The information in this update was composed by the Kidder Mathews Phoenix healthcare brokerage team of Michael Dupuy, Fletcher Perry, Rachael Thompson, Perry Gabuzzi, Chad Sutton, and Zack Harris.
Data source: CoStar
About the Team
The Kidder Mathews team of Michael Dupuy, Fletcher Perry, Rachael Thompson, Perry Gabuzzi, Chad Sutton, and Zack Harris specializes in healthcare real estate services with a strategic focus on the greater Phoenix region. For more information, visit their online team profile here.
About Kidder Mathews
Kidder Mathews is the largest fully independent commercial real estate firm in the Western U.S., with over 900 professionals in 20 offices across Washington, Oregon, California, Idaho, Nevada, and Arizona. We offer a complete range of brokerage, appraisal, asset services, consulting, and debt & equity finance services for all property types. Kidder Mathews averages over $10 billion in transaction volume, manages more than 55 million square feet of space, and conducts 2,600 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
Contact
Michael Dupuy, Executive Vice President
Fletcher Perry, Executive Vice President
Rachael Thompson, Senior Vice President
Perry Gabuzzi, Senior Vice President
Chad Sutton, Associate
Zack Harris, Associate
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