Phoenix Commercial Leasing Activity Declined in Q3 2026
The city saw shifting vacancy rates and sales volume as the local office market navigated the third quarter of 2026.
Updated on Oct. 6, 2026 in Commercial
Live Poll
Do you feel the commercial real estate market in your local area is improving?
Phoenix commercial real estate experienced a period of adjustment during the third quarter of 2026, with leasing activity reaching 1.3 million square feet. While vacancy rates saw a slight year-over-year improvement, the market faced uneven absorption across various corridors.
Why it matters
Market fluctuations in Phoenix highlight the evolving demand for office space as developers shift their focus toward the renovation and repositioning of existing assets. This trend reflects broader efforts to align property offerings with current workplace requirements.
Average direct rental rates held steady at $31.66 per square foot, marking a 2% increase year-over-year. Meanwhile, office-using employment grew by 1.3% as of July 2026.
The details
The Central Corridor recorded a positive net absorption of 105,600 square feet, whereas East Phoenix saw a negative net absorption of 64,600 square feet. Additionally, sublet absorption contributed to nearly half of all net absorption in Class A office spaces, which currently face a 28.3% vacancy rate.
Timeline
July 2026 saw a 1.3% year-over-year increase in office-using employment.
Q3 2026 marked the period for the reported leasing and vacancy shifts.
Culture Shift
The Phoenix market's current focus on renovating existing properties follows the pattern set by the national industry pivot toward building repositioning over new construction. This strategy prioritizes updating older assets to meet modern tenant expectations rather than expanding total inventory.
Businesses looking for space in Phoenix may find increased competition for properties featuring flexible layouts and modern amenities. Tenants should anticipate steady rental rates near $31.66 per square foot as limited new development keeps inventory tight.
The takeaway
The Phoenix office market is increasingly defined by the repurposing of existing infrastructure to maintain relevance. Investors and tenants should prioritize properties that have undergone recent renovations to benefit from modern workplace standards.
Further reading
For additional context on local trends, visit Phoenix Commercial.
Live Poll
Do you feel the commercial real estate market in your local area is improving?
