After the worst year on record in 2024, Metro Phoenix’s office market bounced back in Q1 2025 with 398,769 SF of positive net absorption. One quarter is not a trend but it’s a step in the right direction—and a sign that companies are sending more employees back to the office, and more often.
The direct vacancy rate decreased slightly to 19.6%, but increased sublease inventory caused sublease vacancy to rise to 5.4%. That puts total vacancy at 25%, a figure that will have landlords competing for tenants. New construction is limited to just 117,507 SF, consisting of two build-to-suit projects, both in highly walkable areas.
Below is a link to our full Q1 2025 Office Report, and here are my top 3 takeaways:
— Tenants are finally leasing more space than they’re giving back: That’s a big improvement from 2024. Three more quarters like this and we would match our 20-year average of 1.6 million SF absorbed per year.
— Construction pipeline is nearly frozen: It’s tough to finance and it’s expensive to build.
— Rents are holding up: Despite a 25% total vacancy factor, rents are holding because tenant improvement costs remain stubbornly high. It’s important to have a nice build out for your employees coming back to the office.
If you want help with finding opportunities or representation in this market—please give me a call.
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