Phoenix Office Market Shifted in Third Quarter
As commercial leasing patterns evolve, local business owners and renters should note changing vacancy rates.
Updated on Oct. 6, 2026 in Commercial
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The Phoenix commercial office market saw notable shifts in the third quarter of 2026, with leasing activity reaching 1.3 million square feet. During this period, the total vacancy rate declined by 10 basis points to reach 23.7%.
Why it matters
These market movements reflect a broader pivot as developers prioritize the renovation of existing properties over new office construction. This shift impacts inventory availability and highlights increased competition for spaces featuring modern amenities.
Total leasing activity reached 1.3 million square feet in the third quarter, while average direct rental rates held at $31.66 per square foot. This figure represents a 2% increase in rental rates compared to the previous year.
The players
Phoenix Commercial Real Estate Market
The local hub for office leasing and property investment that is currently prioritizing the renovation of existing assets.
The details
The market is currently driven by a trend toward building repositioning rather than new office investment. Sublet absorption accounted for nearly half of the total Class A net absorption, which saw a 28.3% vacancy rate. While the Central Corridor recorded a positive net absorption of 105,600 square feet, East Phoenix saw a negative net absorption of 64,600 square feet.
Timeline
July 2026: Office-using employment increased 1.3% year-over-year.
Q3 2026: Leasing activity and vacancy rate shifts occurred.
The Home Front
The Phoenix office market is following the national shift toward repositioning aging properties to meet current demand. This trend suggests a cooling in new construction as owners focus on improving the quality of existing, often under-occupied commercial space.
If you are a business owner or renter in Phoenix, watch for how these vacancy trends affect commercial rental rates and space availability in your specific neighborhood. Consider prioritizing sites with modern, flexible configurations as they become increasingly competitive.
The takeaway
The Phoenix commercial market is favoring the renovation of existing assets over new developments as vacancy rates tighten slightly. Monitor local absorption rates in your district to gauge whether your area is seeing increased demand for modernized office footprints.
Further reading
For more on the changing landscape of local property, visit our Commercial section.
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