Phoenix office market shows encouraging signs of recovery

Article originally posted on AZ Big Media on June 18, 2026

For years, the Phoenix office market has been defined by questions surrounding remote work, rising vacancies and shifting tenant demands. But new data suggests the narrative is beginning to change.

According to CommercialCafe’s May 2026 Office Market Report, Phoenix is quietly emerging as one of the healthiest office markets in the western United States, with declining vacancy, rising lease rates, strong investment activity and a measured development pipeline that positions the metro well for continued recovery.

Among the largest office markets in the country, Phoenix posted a vacancy rate of 16.4% in May—well below the national average of 17.6% and second only to Los Angeles among major Western markets. Vacancy also improved by 100 basis points from one year ago, signaling that businesses continue to lease space despite evolving workplace strategies.

That trend reflects a broader national shift as companies increasingly prioritize high-quality office environments that encourage collaboration and attract employees back to the workplace.

Phoenix is also benefiting from steady pricing.

Average office asking rents reached $29.65 per square foot in May, a 4.1% increase from a year earlier. While still below the national average of $33.61 per square foot, Phoenix remains one of the country’s most affordable large office markets, offering companies a compelling combination of value, modern space and a business-friendly environment.

Investors continue to take notice.

Office sales in metro Phoenix totaled $521 million through the first five months of 2026, ranking among the strongest markets in the West. Only San Francisco, the Bay Area and Los Angeles recorded higher office sales volumes during the same period, underscoring continued confidence in Phoenix’s long-term commercial real estate outlook.

Table with 6 columns and 9 rows. (column headers with buttons are sortable)

Bay Area	$55.68	22.2%	$1,671	$327	0.41
Phoenix	$29.65	16.4%	$521	$163	0.60
Seattle	$35.43	23.3%	$297	$292	0.02
Los Angeles	$41.73	14.1%	$752	$341	1.44
Portland	$28.10	22.0%	$106	$119	–
Denver	$30.17	19.9%	$369	$84	0.67
San Francisco	$62.11	23.3%	$2,264	$614	0.59
San Diego	$42.55	23.6%	$454	$206	1.73
National	$33.61	17.6%	$23,038	$213	28.73

Development activity also remains disciplined.

Approximately 600,000 square feet of office space is currently under construction in the Valley—a relatively modest pipeline compared with many peer markets. Nationally, office construction has slowed dramatically as developers focus on absorbing existing inventory before launching major new projects.

That restrained approach could ultimately benefit Phoenix by preventing an oversupply of office space while allowing demand to gradually catch up.

The city’s economic diversity continues to support the office sector as well. Growth in professional services, financial firms, healthcare, advanced manufacturing and technology has created a broad tenant base that is less dependent on any single industry. Continued semiconductor investment, led by companies such as TSMC and its growing supplier ecosystem, is also fueling demand for engineering, legal, consulting and professional office users throughout the region.

Nationally, the office market continues to evolve rather than disappear.

CommercialCafe reports that office attendance has stabilized at roughly 55% nationwide, reinforcing hybrid work as the new normal. Rather than abandoning office space altogether, many employers are upgrading to higher-quality buildings with better amenities and flexible layouts designed to support collaboration.

Phoenix appears well positioned to capitalize on that trend.

With vacancy continuing to decline, rents trending upward, significant investor interest and one of the most balanced supply pipelines in the West, the Valley’s office market is showing that recovery isn’t defined by a return to the past. Instead, it’s being shaped by a more modern workplace—one that values flexibility, quality and strategic growth.

For Phoenix, those fundamentals suggest the office market’s next chapter may be one of resilience rather than reinvention.