Q1 2023: Phoenix Office Market Report
The Phoenix office market faces uncertainty as workplace preferences and a potential economic disruption squelch demand for office space. Against this setting, firms are reevaluating their space needs, and many have opted to downsize their footprints or shutter offices altogether. These factors contributed to -850,000 square feet of negative net absorption over the past 12 months, as nine of the past 11 quarters saw more space vacated than occupied. As a result, the overall vacancy rate has steadily risen from 11.4 percent entering the pandemic to 15.1 percent today, with expectations for future increases in the coming quarters. Tempe and Chandler are feeling the brunt of the recent weakness. Tech companies that were aggressively expanding over the past few years targeted these submarkets to set up regional operations. Submarkets like the Camelback Corridor and Scottsdale Airpark have held up better. These areas have a tenant base more heavily weighted toward law, healthcare, real estate, and finance firms, which are more reliant on their physical footprints and have been less willing to relinquish space.