Phoenix office space conversions outpace new construction Article originally posted on AZ Central on June 16, 2025 Nationwide, more office space will be torn down or converted to new uses than built this year, and Phoenix is among the top markets where space is being converted. According to a report from Global Commercial Real Estate Services, Phoenix has 15 projects totaling about 3 million square feet of office space to be either razed or converted. The metro ranked 9th for the total square footage of office space earmarked for conversion into other uses. Manhattan, Washington D.C. and Houston were the top three markets, respectively. Some markets, including New York City, Washington D.C. and Cleveland, offer incentive programs to convert obsolete offices. Four of the Phoenix projects will take office space and convert it to apartments. Three of those projects are planned, with one underway. The building underway is the One Camelback project at Central Avenue and Camelback Road, which has been under construction for years but has come in stops and starts, with very little recent progress. The Phoenix Financial Center, commonly known as the Punchcard Building, is also proposed for a conversion. It is in escrow to be sold to a developer that plans to convert the tower into 209 hotel rooms and 143 apartment units. In midtown Phoenix, a former office building in midtown Phoenix that once housed the Drug Enforcement Administration was converted into an apartment complex and opened for tenants in summer of 2024. Jessica Morin, director of U.S. office research for CBRE, said even though there are several buildings planned for conversion to apartments, the process can be difficult and expensive. Most obsolete office buildings in Phoenix were built in the 1970s and 1980s, and have large floor plates with only exterior windows, meaning only the perimeter of such buildings would be suitable for living space. Because the conversions can be very expensive and time-consuming, these buildings need to be in areas where people are willing to pay high-end rent to justify the cost of such projects, she said. Phoenix has also seen office buildings converted to industrial or data centers, Morin said. Between 2019 and 2022, three offices were converted to industrial uses, and four additional conversions are planned. Despite conversions becoming more common, Morin said nationally, they are still a very small percentage of office inventory. However, vacant buildings can be a drag on a neighborhood, and conversion can mean new vibrancy. “Locally this can have really big impacts,” she said. “They can be really transformative.” Some office buildings sell for land value alone But some buildings that are functionally obsolete and may not lend themselves well for conversion are being demolished and redeveloped for new uses. “Some office buildings are selling at pretty much land value,” Morin said, meaning that the buildings on the sites add little or nothing to the value and developers buy them for land alone. In Phoenix, near Interstate 17 and Peoria Avenue, Formation Interests bought a four-building office complex on 23 acres of land with the intent to demolish the buildings and build an industrial complex in its place. “These offices are never going to come back, they are functionally obsolete,” Mike Gilbert, director of the Southwest region for Formation, said. His company was drawn to the site because there is almost no developable land along I-17, but there is demand for new industrial buildings. All the tenants except one had vacated the property, Gilbert said, and the last tenant will move out in September. Formation has already begun demolition on the property. It will build a total of 430,000 square feet of new space across four buildings. Construction of the new buildings will start in August and is expected to complete by fall of 2026.