Phoenix AZ – February 19, 2026 | By STAFF HERE PHOENIX WRITER
WHAT’S HAPPENING
What was the net absorption for Greater Phoenix office space in Q4 2025?
Greater Phoenix office space saw 531,893 square feet of net absorption in Q4 2025, reaching its highest point since Q4 2019.
What was the total net absorption for Greater Phoenix office space in all of 2025?
The Greater Phoenix office market recorded a total of 414,850 square feet in net absorption for the entirety of 2025.
How did vacancy rates change in the Phoenix office sector by Q4 2025?
Direct vacancy in the Greater Phoenix office market declined to 15.1 percent by Q4 2025, a decrease from the previous year.
What was the construction activity level in the Phoenix office sector in Q4 2025?
Construction activity in the Greater Phoenix office market hit a 10-year low in Q4 2025, with approximately 564,057 square feet under construction.
The Greater Phoenix office market saw a significant rebound in Q4 2025, achieving its highest net absorption since 2019 with 531,893 square feet. Vacancy rates dropped to 15.1 percent, and construction activity hit a 10-year low, signaling a robust recovery in Arizona’s commercial real estate sector.
Greater Phoenix Office Market Recovers to Pre-Pandemic Performance in Q4 2025
The Greater Phoenix office market demonstrated a strong rebound in the fourth quarter of 2025, reaching its highest net absorption since the fourth quarter of 2019, according to a Colliers report released on February 17, 2026. The market posted 531,893 square feet of net absorption in Q4 2025. Direct vacancy in the region declined to 15.1 percent, accompanied by construction activity hitting a 10-year low. Strong tenant demand drove gross leasing to over 1.0 million square feet, with overall rental rates showing a slight increase.
What was the net absorption in 2025 for Greater Phoenix office space?
The positive momentum in the final quarter contributed to a total of 414,850 square feet in net absorption for the entirety of 2025, marking the first year of positive net absorption for the Greater Phoenix office market since 2020. The direct vacancy rate saw a year-over-year fall of 20 basis points, settling at 15.1 percent.
Declining Vacancy and Construction Activity in the Phoenix Office Sector
The decline in direct vacancy was further supported by a significant reduction in available sublease space. From year-end 2024, available sublease space decreased by 1.8 million square feet, leading to a 140-basis-point reduction in the total availability rate, which stood at 18.1 percent. The 4.9 million square feet available for sublease marked the lowest level recorded since the fourth quarter of 2021. Construction activity experienced a 10-year low, with approximately 564,057 square feet of office space under construction, 75 percent of which consisted of build-to-suit projects. Furthermore, the demolition of several non-performing office properties for redevelopment reduced the total office inventory by more than 800,000 square feet.
How did leasing and rental rates perform in Q4 2025?
Strong tenant demand was a key driver for the market’s performance, pushing gross leasing activity to exceed 1.0 million square feet during the fourth quarter. Leasing was broadly distributed across the market, with submarkets such as Chandler, Camelback Corridor, Scottsdale Airpark, and Tempe each accounting for over 100,000 square feet of leasing, collectively representing 65 percent of the total gross leasing for the quarter. Class A properties continued to show strength, recording 1.047 million square feet of positive net absorption in 2025.
Overall rental rates recorded a small increase for the third consecutive quarter, rising 0.53 percent to $30.12 per square foot. Class A assets experienced the most significant year-over-year increase in rental rates, climbing 5.9 percent compared to 2024, reaching $34.12 per square foot. In contrast, Class B and Class C assets observed declines in their rental rates.
Office Sales and Economic Expansion in the Greater Phoenix Area
Office sales activity continued its momentum from the third quarter into the fourth quarter of 2025. The market saw a 6.9 percent increase in sales volume quarter-over-quarter, totaling $530.0 million. However, this activity was 5.19 percent slower when compared to the fourth quarter of 2024. For the full year, total office sales volume in 2025 reached $1.56 billion, marking a 5.9 percent increase over 2024 and representing the highest volume since 2022. Six transactions closed during the fourth quarter, encompassing 448,147 square feet, with all properties acquired by development firms planning repurposing for alternative uses. Owner-user purchases and private capital investments continued to lead buyer activity in the office market, and Scottsdale Airpark registered the highest sales volume at $98.4 million during the fourth quarter. A significant move-out involved AAA vacating a 206,334 square foot building, although the tenant relocated and reduced its footprint by 75 percent.
Underlying Economic Factors Supporting Market Growth
The robust performance of the Greater Phoenix office market is supported by broader economic growth in the region. In 2025, the Arizona Commerce Authority and its economic partners successfully secured 90 competitive projects, which are projected to create 27,749 jobs and bring in over $34 billion in capital investment. Major companies, including Comtech, Dutch Bros, and Cognite, have targeted the Phoenix market for corporate expansion and headquarters relocations. Furthermore, Phoenix led the nation in job gains across finance, insurance, and administrative support sectors in 2025, indicating a deepening need for office space.
Greater Phoenix Office Market Key Metrics (Q4 2025)
| Metric | Value (Colliers Report, Feb 17, 2026) |
|---|---|
| Net Absorption (Q4 2025) | 531,893 square feet |
| Direct Vacancy Rate (Q4 2025) | 15.1 percent |
| Construction Activity | 10-year low |
| Gross Leasing (Q4 2025) | Over 1.0 million square feet |
| Overall Rental Rate Increase (Q4 2025) | 0.53 percent to $30.12 per square foot |
| Available Sublease Space Decline (Y-E 2024 to Q4 2025) | 1.8 million square feet |
| Total Office Sales Volume (2025) | $1.56 billion |
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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.
