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Market Report

Phoenix Office Market Report

2Q 2024

Demand for Smaller Spaces Shines
Amid Overall Leasing Volatility

Small-scale footprints remain the least available. Floor plans between 10,000 and 50,000 square feet posted vacancy in the mid-7 percent range in March, roughly one-third of the metro’s overall level. The divergence reflects strengthening tenant preferences for smaller offices — a trend weighing on net absorption. UnitedHealth Group, Carvana and Tech Data each downsized from 100,000-square-foot-plus spaces in the first quarter of 2024, contributing to a 40-basis-point marketwide vacancy jump in the span. Fortunately, lease exits of similar sizes are declining in frequency. As of May, Express Messenger Service’s relinquishment of 60,000 square feet was the largest expiration set for the remainder of this year. Fewer downsizings will slow the metro’s vacancy rise relative to 2023, despite the delivery of over 1 million square feet this year. 

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