Phoenix’s office market is showing signs of improvement, but declining vacancy and renewed job growth are not translating into a uniform recovery. Newer buildings and sought-after locations are gaining ground, while older properties continue to face leasing challenges, according to Marcus & Millichap’s Q4 2026 Phoenix Metro Area Office report.
The report points to a market increasingly shaped by property quality, location and the removal of obsolete space. Its 2026 forecast calls for metro vacancy to decline 30 basis points to 18.5%, with average asking rent increasing 0.5% to $26.60 per square foot.
“Phoenix is not experiencing a broad-based office recovery. We are seeing a flight to quality, with the strongest assets and locations gaining momentum while older commodity space continues to face significant pressure,” said Ryan Sarbinoff, senior managing director, market leader.
Metro vacancy declined 20 basis points year to date through June, largely because of inventory removals. Demolitions and redevelopment removed more than 2 million square feet of office space during the year ended in June, primarily in Northwest Phoenix, Tempe and near Sky Harbor International Airport. That reduction helped improve the vacancy rate without necessarily signaling a comparable increase in tenant demand.
Office deliveries are expected to increase from 2025 but remain below half the past-decade average, limiting the amount of new space entering a market still working through elevated vacancy.
Performance also varied considerably by location. The Camelback Corridor and North Scottsdale led vacancy improvement, while Central Corridor vacancy increased 300 basis points to 26.5%. The divergence underscores how metro-level figures can obscure substantially different conditions across office districts.
Building age and size reveal another divide. Vacancy at properties larger than 50,000 square feet and built after 2010 fell approximately 600 basis points from its 2024 peak to about 22%. Those gains indicate stronger performance among newer, larger properties, although major lease commitments remained limited. Only around five leases exceeding 50,000 square feet were signed through August, compared with roughly 15 during the same period a year earlier.
Employment trends offered a more encouraging signal. Phoenix added more than 6,000 office-using jobs through July after losing white-collar positions from 2022 through 2025. Professional services added approximately 7,000 jobs, while financial activities lost 2,000 positions. The uneven gains suggest that potential demand for office space will depend partly on which industries are expanding.
Investment activity remained selective in 2026 amid elevated vacancy and softer leasing conditions. Private buyers favored well-leased properties built after 1980, while larger transactions generally involved repositioning older buildings for alternative uses. Those patterns reflect two distinct investment approaches: acquiring properties with established occupancy or pursuing a different future for buildings facing persistent leasing challenges.
“The next phase of the Phoenix office cycle will be defined less by broad market recovery and more by asset selection. Well-located, high-quality properties should continue to outperform, while challenged assets will require either a meaningful basis adjustment or a clear repositioning strategy,” added Sarbinoff.
The findings suggest that modest improvement in Phoenix’s overall office metrics will continue to coexist with significant pressure on individual properties. For owners and investors, the outlook depends on a building’s ability to attract tenants, compete within its location and support a viable long-term use.
