Phoenix, December 19, 2025
As traditional office construction dwindles across the U.S., Phoenix stands out by embracing flexible coworking spaces. The local entrepreneurial spirit is evident as the city adapts to changing business needs, fostering innovation and economic growth. Despite a nationwide decline in new office developments, Phoenix’s coworking sector has expanded significantly, demonstrating resilience and a commitment to creating accessible workspaces. This adaptability is bolstering economic prosperity in the region, particularly in suburban areas, reshaping the city’s commercial landscape.
Phoenix’s Flexible Future: Coworking Thrives Amidst National Office Shift
As traditional office construction scales back across the nation, Phoenix embraces agile workspaces, demonstrating local entrepreneurial spirit and adapting to evolving business demands.
Phoenix, Arizona, continues to solidify its reputation as a hub for innovation and business, navigating the dynamic shifts occurring in the commercial real estate landscape with remarkable adaptability. While the national office market experiences a notable contraction in its development pipeline, Greater Phoenix entrepreneurs are demonstrating significant resilience and foresight, recognizing the value of flexible workspace solutions. This proactive approach underscores the city’s commitment to fostering a vibrant economy where ingenuity and strategic adaptation are key drivers of growth.
The spirit of free enterprise thrives in Phoenix, where a supportive business environment and a culture of personal achievement empower small businesses and startups to flourish. This climate, often shaped by a streamlined regulatory framework, allows new ventures to innovate and scale efficiently. The city’s ability to pivot and embrace new models, such as the surging popularity of coworking, illustrates a dynamic market that is not just reacting to change but actively shaping its future, providing fertile ground for continued economic prosperity in the region.
National Office Market Experiences Significant Contraction
Across the United States, the traditional office market has witnessed a notable downturn in new construction. Early in 2024, approximately 97 million square feet of office space was in various stages of development at the national level, representing a 28% drop compared to the previous year’s total. This trend continued throughout 2025, with the national office supply pipeline remaining modest. As of early November 2025, a little more than 33 million square feet of office space was under construction nationally. By early December 2025, this figure slightly decreased to a little more than 32 million square feet.
The ongoing contraction reflects a significant shift in the commercial real estate sector. Projects in the planning stages or those that have broken ground now represent less than 2% of total stock nationally, a decline from 3% just a year ago. In June 2025, development activity showed nearly 41 million square feet of office space under construction across top U.S. markets, accounting for an estimated 0.6% of stock and marking what appears to be the lowest level of activity in recent years. This nationwide reduction in new supply has led many markets to explore alternative uses for unoccupied office spaces, particularly office-to-residential conversions, to circumvent reduced demand.
Phoenix’s Resilient Office Landscape Adapts
Despite the broader national trend of a sluggish office market, Phoenix has shown remarkable adaptability. While the city’s office market did start 2025 on a muted note, with minimal construction and below-average pricing, it has demonstrated a strategic shift towards more flexible solutions. Phoenix recorded just 170,521 square feet of office construction starts across three projects in early 2025, which was one of the lowest among peer metros. The metro had only 826,426 square feet under construction, equivalent to 0.6% of total inventory, falling below the national average of 0.7%.
However, the Phoenix office market also exhibits notable strengths. In early 2025, Phoenix’s office vacancy rate stood at 18.7%, which was under the national average of 19.7%. Furthermore, the Phoenix office market ranked sixth among large markets in the first quarter of 2025, earning top-10 scores across several key indicators. The Arizona office market experienced the fourth-highest percentage-point dip in its vacancy rate compared to the previous quarter, and its office space had the seventh-lowest vacancy at the close of Q1 among markets larger than 100 million square feet.
The Surging Popularity of Flexible Workspaces
The demand for flexibility in office arrangements has driven a significant expansion of the coworking segment. This trend is evident nationwide, with the national coworking inventory reaching 7,695 spaces at the end of 2024, marking a 2% increase from the third quarter of that year. This growth signals a continuing upward trend, largely driven by the increasing demand for flexible workspace solutions.
Phoenix has emerged as a particularly strong market for coworking. Its coworking inventory surged past 2.9 million square feet in early 2025, more than doubling its 2024 total of 1.2 million square feet. The shared office sector in Phoenix now constitutes 2% of the market, which is on par with the national average and surpasses cities like Dallas, Austin, and Houston. Phoenix’s total coworking square footage ranks 14th largest nationally and boasts the third-highest growth rate, increasing by 8% from over 2.67 million square feet in Q4 2024. The number of coworking spaces in Phoenix also ranks 11th highest nationally, rising by 4% from 149 locations in Q3 to 155 in Q4.
Suburban Coworking Fuels Local Economic Growth
A significant aspect of Phoenix’s coworking boom is its expansion into suburban areas. The suburbs of Phoenix have seen a substantial increase in coworking sites, reporting 4.5 million square feet of suburban coworking space. This represents a remarkable 185% jump from the 1.5 million square feet recorded in 2023, positioning the Phoenix metro area in sixth place nationally for suburban coworking space. The share of coworking square footage located in suburban areas within Phoenix has also increased significantly, rising from approximately 60% in 2023 to 82%.
This localized growth provides accessible, adaptable workspaces closer to where many residents live, supporting a more distributed workforce and enhancing small-business resilience across various neighborhoods. It also reduces commute times, potentially freeing up time for personal achievement and community involvement, thereby contributing to a better quality of life and sustained economic growth in peripheral areas.
Phoenix: A Hub for Entrepreneurial Innovation and Investment
Phoenix’s robust economic growth is further fueled by its thriving entrepreneurial ecosystem. The city ranks among the top 10 U.S. cities for enterprise value growth since 2017, demonstrating a 4.3x increase over the past seven years and outpacing major metros like Boston, New York City, and Chicago. New business creation in Greater Phoenix and across Arizona saw an increase of over 8% year-over-year in 2023. Phoenix also holds the seventh position among U.S. cities with the most startups.
This dynamic environment is supported by significant private investment. Venture capital funding in Greater Phoenix experienced a substantial 146% growth from 2014 to 2024, outperforming peer markets such as Austin (86%) and Atlanta (58%). In the first quarter of 2025 alone, Phoenix startups secured $214 million across 34 deals. The state’s forward-thinking approach is also evident in its regulatory landscape; Arizona was the first state in the nation to launch a Regulatory Sandbox Program in 2018, which allows companies to test innovative financial products and technologies without requiring full licenses. This commitment to fostering entrepreneurial innovation and limiting unnecessary regulatory burdens contributes significantly to Phoenix’s attractiveness for new businesses and investors, ensuring a fertile ground for continued economic expansion.
Conclusion
Phoenix’s commercial real estate market is demonstrating remarkable agility, successfully navigating the nationwide trend of a shrinking office pipeline by embracing and expanding its coworking sector. This strategic adaptation is a testament to the city’s robust entrepreneurial spirit, where small-business resilience and innovation are not just valued but actively nurtured. The significant growth in Phoenix’s coworking inventory, particularly in suburban areas, provides flexible and accessible options for a diverse workforce, contributing to sustained economic growth across the region. With a business-friendly environment and a commitment to fostering entrepreneurial innovation, Phoenix continues to strengthen its position as a leading urban center.
Readers are encouraged to support local businesses and engage with Phoenix’s dynamic entrepreneurial community to contribute to the city’s bright economic future.
Frequently Asked Questions
- What is the current national trend for office construction?
- The national office supply pipeline remained modest at the start of December 2025, with a little more than 32 million square feet of office space currently under construction. This total represents 44% fewer square feet under construction than a year before.
- How has Phoenix’s coworking market grown?
- Phoenix’s coworking inventory surged past 2.9 million square feet in early 2025, more than doubling its 2024 total of 1.2 million square feet. The shared office sector in Phoenix now represents 2% of the market.
- How does Phoenix rank for suburban coworking space?
- The Phoenix metro area is in sixth place nationally for suburban coworking space, with 4.5 million square feet of suburban coworking space.
- What is Phoenix’s ranking for entrepreneurial growth?
- Phoenix ranks among the top 10 U.S. cities for enterprise value growth since 2017, posting a 4.3x increase over the past seven years.
- What is the national office vacancy rate?
- The national office vacancy rate was 18.5% in November 2025.
- What is Arizona’s approach to regulatory innovation?
- Arizona was the first state in the nation to launch a Regulatory Sandbox Program in 2018, enabling companies to test innovative financial products and technologies without obtaining full licenses or authorizations.
Key Features of the Evolving Office Market
| Feature | National Trend/Fact | Phoenix Specifics |
|---|---|---|
| Office Supply Pipeline (Construction) | A little more than 32 million square feet under construction nationally in early December 2025, representing 44% fewer square feet than a year prior. | 170,521 square feet of construction starts across three projects in early 2025, one of the lowest among peer metros. |
| Coworking Inventory Size | National coworking inventory reached 7,695 spaces at the end of 2024. | Surged past 2.9 million square feet in early 2025, more than doubling its 2024 total of 1.2 million square feet. |
| Coworking Market Share | Projects in planning stages or broken ground represent less than 2% of stock nationally. | Shared office sector represents 2% of the market, on par with the national average. |
| Suburban Coworking Growth | Suburban coworking square footage nationally jumped from about 55.5 million square feet in 2023 to over 87.6 million square feet at the beginning of 2025. | 4.5 million square feet of suburban coworking space, a 185% jump from 1.5 million square feet in 2023, ranking sixth nationally. |
| Office Vacancy Rate | National office vacancy rate was 18.5% in November 2025. | 18.7% in early 2025, under the national average. Ranked seventh-lowest vacancy at the close of Q1 among markets larger than 100 million square feet. |
| Entrepreneurial Growth Ranking | N/A | Ranks among the top 10 U.S. cities for enterprise value growth since 2017. Ranks seventh among U.S. cities with the most startups. |
| Venture Capital Funding Growth (2014-2024) | N/A | Grew 146% from 2014 to 2024, outpacing Austin (86%) and Atlanta (58%). |
| Regulatory Framework | N/A | Arizona was the first state in the nation to launch a Regulatory Sandbox Program in 2018. |
Deeper Dive: News & Info About This Topic
HERE Resources
New Affordable Housing Development ‘Desert Sky’ Breaks Ground
ColRich Acquires Camden Copper Square for $77 Million
Premier Inn Hotel Planned for Vauxhall
Jersey City Secures $255 Million in Real Estate Refinancing
Author: STAFF HERE PHOENIX WRITER
The PHOENIX STAFF WRITER represents the experienced team at HEREPhoenix.com, your go-to source for actionable local news and information in Phoenix, Maricopa County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Waste Management Phoenix Open, Cactus League Spring Training, and Arizona State Fair. Our coverage extends to key organizations like the Greater Phoenix Chamber of Commerce and Visit Phoenix, plus leading businesses in technology and healthcare that power the local economy such as Intel and Banner Health. As part of the broader HERE network, including HERETucson.com, we provide comprehensive, credible insights into Arizona's dynamic landscape.
