Phoenix Office Market Report

Mid- and lower-tier rents jump up. Phoenix’s Class B/C average asking rent rose 4.9 percent year-over-year in June, marking nearly a six-year high. This climb was fueled by a vacancy rate in the segment that stood at least 250 basis points below the long-term average in that span. Demand for lower-cost floorplans has especially stood out in submarkets that are anchored by entertainment districts or malls, which support tenants in recruiting and accommodating their in-office workforces. Reflecting this, Class B/C average asking rents in Scottsdale and West Phoenix jumped by over 5 percent in the last year, as spots near the Old Town and Westgate entertainment hubs continued to generate tenant competition. This trend is most likely to sustain in Scottsdale in the near-term, where firms like Banner Health and Vanguard are slated to move into a total 335,000 square feet of B/C spaces in the final half of 2023.