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Market Report

Phoenix Office Market Report

2Q 2023

Top- and Mid-Tier Office Performance to Further
Diverge as Supply Additions Pick Back Up

Class B/C spaces exhibit greater resilience. Through the past 12 months ended in March, a net of 544,000 square feet of Class B and C space was absorbed, a sharp contrast to the net 409,000 square feet of Class A offices put back on to the market. Amid macroeconomic concerns and the prominence of remote work, most tenants are choosing to occupy smaller and less-costly floor plans, causing metrics to diverge between office property tiers. The vacancy rate among mid- and lower-tier properties fell 30 basis points to 14.8 percent over the year preceding April, while Class A availability conversely rose 210 basis points to a record of 27.9 percent. Moving forward, this forked performance will likely continue and may even grow in magnitude, with top-tier supply growth set to pick up this year and in 2024. Major commitments slated for the coming months from Banner Health, Meritage Homes and Raley’s Companies will also chip away from existing available Class B stock near-term. 
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