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Market Report

Phoenix Office Market Report

4Q 2022

Bifurcated Demand Emerges Amid Economic Uncertainty;
Mixed-Use Offices Top Metro 


Lower- to mid-tier demand buoys overall performance. Marketwide office fundamentals are strengthening, largely due to surging demand for Class B/C floorplans over the past year. While a net of 300,000 square feet of Class A space was returned to the market during the 12-month period ending in June, a net of 1.6 million square feet of lower- and mid-tier space was absorbed during the same timeframe. This lowered overall vacancy 20 basis points — marking the metro's first year-over-year compression since March 2020 — despite a 180-basis-point jump in Class A availability. Amid uncertain economic conditions, demand for Class B/C offices has continued, with preliminary third quarter data suggesting the sector will record a second consecutive three-month span of positive absorption. This leasing activity has the potential to offset the performance of the Class A sector, which still remains in flux.

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