Phoenix Office Sector Posts Record Net Absorption Since 2019
The Phoenix office market is showing clear signs of recovery heading into 2026. According to Colliers, the Greater Phoenix office sector recorded its highest net absorption since Q4 2019, reflecting stronger tenant demand, declining vacancy rates, and renewed confidence in office space after years of pandemic disruption.
Here’s a closer look at what this rebound means for commercial real estate, employers, investors, and the broader Phoenix property market.
A Market Moving Toward Recovery
Net absorption — the difference between leased office space and space that became vacant — is a key indicator of market health. In Q4 2025, Phoenix posted approximately 531,893 square feet of positive net absorption, the strongest quarterly result since late 2019.
For the full year, total net absorption reached 414,850 square feet, marking the first year of positive absorption since 2020 and a notable shift from the negative absorption trends that dominated the post-pandemic office market.
Vacancy Declines and Leasing Activity Rises
This improvement helped drive direct office vacancy down to 15.1%, reflecting higher occupancy rates. Available sublease space also decreased by about 1.8 million square feet compared to year-end 2024, bringing total availability to roughly 18.1%.
Leasing activity was strong across multiple submarkets, including Tempe, Scottsdale Airpark, Camelback Corridor, and Chandler, contributing to a broad-based recovery.
What’s Driving Phoenix Office Demand
Several factors are fueling renewed office activity:
Return-to-Office Momentum – Companies are encouraging hybrid or full-office returns, boosting demand for strategically located space.
Tenant Preference for Quality Space – Leasing is strongest in Class A properties, reflecting a shift toward modern, amenity-rich, and flexible offices.
Limited New Construction – Office construction is at a 10-year low, helping balance supply and demand.
Conversions and Redevelopment – Underperforming office buildings are being repurposed or redeveloped, reducing surplus inventory and aligning space with current tenant needs.
Implications for Investors and Employers
For commercial investors, Phoenix’s office market rebound may support higher property values, improved leasing fundamentals, and renewed investor interest. Reduced availability and rising tenant demand can drive stronger rental rates and more stable income streams, particularly in high-quality buildings.
Employers evaluating office space may also find more flexible leasing options and better-quality inventory, aligning with hybrid work models without the oversupply challenges seen earlier in the decade.
Looking Ahead: 2026 and Beyond
While challenges remain — including hybrid work patterns and evolving space needs — the Phoenix office sector’s recent performance suggests a more optimistic outlook. Experts expect net absorption to remain positive in 2026, supported by tenants securing space in desirable submarkets and continued adaptive reuse of older properties.
The Phoenix office market’s strongest net absorption since pre-pandemic times marks a milestone for the sector. Declining vacancy, rising leasing activity, and disciplined construction all point to a more balanced commercial real estate market.
Whether you’re a commercial investor, a business evaluating office options, or following Phoenix market trends, this rebound signals that office fundamentals are stabilizing and adapting to modern workplace needs.