Market Posted Second Consecutive Quarter of Positive Net Absorption

Phoenix (May 19, 2026) – A recent Colliers report covering the first quarter of 2026 shows positive net absorption for a second consecutive quarter. The Greater Phoenix office market continues its post-pandemic recovery with strong leasing and a decline in total inventory as obsolete buildings are re-purposed.

The Phoenix market is experiencing tremendous economic growth from manufacturing and technology, which is now spilling over into the office market. Strong leasing activity, along with the delivery of Republic Services’  265,525-square-foot new headquarters, helped first quarter post the second strongest net absorption in nearly four years. First quarter net absorption reached 432,379 square feet. The Tempe submarket dominated the leasing activity in the first three months of 2026, accounting for nearly 35 percent of total square footage leased.  Class A assets recorded 498,865 square feet of positive net absorption market-wide, while both Class B and Class C assets posted negative totals.

Direct vacancy dropped 60 basis points over the quarter to 14.5 percent.  This was influenced by the removal of nearly 1 million square feet of inventory.  Class A properties saw a 40 basis point decline in vacancy to 19.1 percent.  For the first time in nine consecutive quarters, sublease space increased.  A modest 33,178 square feet of sublease space was added, yet sublease space has decreased 36.7 percent since its peak of 7.8 million square feet in first quarter of 2024.

Total inventory of office space has been declining, as developers move forward with re-purposing obsolete office buildings to meet market needs.  Three buildings traded in the first quarter 2026 to developers planning new usage.

Construction levels in the office market decreased to the lowest level, with just 184,500 square feet under way within two buildings. Both structures are build-to-suit developments with deliveries expected over the next two quarters.  Limited available capital for speculative office development, coupled with the rental rates required to achieve acceptable investment returns, continues to suppress new construction.

Overall rental rates posted a small increase in first quarter, rising 1.33 percent to $30.52 per square foot.  Class A assets recorded the largest year-over-year gain, rising 1.41 percent to $34.60 per square foot.  The market is highly bifurcated, with Class A significantly outperforming Class B and Class C properties.  Premier submarkets with highly amenitized Class A properties captured the strongest year over year rent growth.  Camelback Corridor rents rose 6.3 percent to $44.79 per square foot, while South Scottsdale rents increased 4.1 percent to $41.16 per square foot.  Two leases signed during first quarter set a new high watermark for the market, with starting rates exceeding $62.00 per square foot.

Sales volume declined 33.3 percent from fourth quarter 2025, but increased 53.7 percent year-over-year, reaching $353 million.  This is still a 53.7 percent better performance than first quarter 2025.  The average price per square foot paid during first quarter 2026 was $207.   Tempe submarket led the quarter in sales activity, experiencing more than 30 percent of the total volume across seven transactions.  The largest transaction of the quarter was the five-property “Rio West” portfolio totaling 296, 663 square feet that sold for $61.5 million.  The largest single-asset sale was Thirty 03 (3003 N. Central Ave.), a 26-story Midtown tower that sold for $32.25 million.  Three buildings sold during first quarter are slated for repurposing, which will remove more than 335,000 square feet from the existing inventory when they are placed under construction.

The Greater Phoenix office market continues its path to rebalancing.  The push for employees to return to the office is more prevalent and is expected to strengthen as 2026 unfolds.  While certain submarkets will continue outperforming others, the environment creates opportunities for tenants to secure space in lower performing areas at discounted rates.  Strong support from economic development groups and general pro-business elements of our market are positioning us to attract out-of-state companies, particularly those seeking business-friendly regulations and partnerships with higher education institutions to sustain a robust labor force.

Full report here.

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Sale Transactions:
Jay Mininberg and Thomas Bean, CCIM, negotiated the sale of a 4,644 SF office building for $1.335 million, representing the seller Cyberitas Enterprises, LLC. The property is located at 4736 N. 12^th St., Phoenix, AZ. The buyer, Abrio Investment Group, LLC, was represented by Carson Eilers with Original Realty Co.

Drew Eisen and Isy Sonabend negotiated the sale of a 6,000 SF industrial building for $695,000 representing the buyer, Fire Dragon Holdings, LLC. The property is located at 9205 N. 10^th Ave., Phoenix, AZ. The seller, RAB Holdings, LLC, was represented by Blake Mallery, Jason Butler and Beth Jo Zietzer with ROI Properties.

Lease Transactions:

Matt Harper, CCIM,  represented the tenant, Discount Depot 3, LLC in a 61-month industrial lease for 20,352 SF at 405 N. 75^th Ave., Phoenix, AZ. The landlord, CI PHX I-GW, LLC, was represented by Phil Haenel, Mike Haenel and Brandon Borsheim with Cushman & Wakefield.

Laurel Lewis represented the tenant, Arrive Logistics, in a 40-month office lease for 15,148 SF at 4940 S. Wendler Drive, Tempe, AZ. The landlord, Orsett/Baseline, LLC, was represented by Spencer Nast with CBRE.

Mark Wilcke and Larson Wilcke represented the tenant, Boston Barricade Company Inc., in a 62-month industrial lease for 7,098 SF at 2452 W. Birchwood Ave., Mesa, AZ. The landlord, BKM Broadwood 251, LLC, was represent by Golden St. John with Vantage Commercial.

Joe Pequeno and Troy Giammarco represented the tenant, Place of Hope Treatment Center, LLC, in a 39-month office lease for 4,064 SF at 3150 N. 24^th St., Phoenix, AZ. The landlord, Riviera Business Management, LLC, was represented by Jeremy Stour with Commercial Properties, Inc.

Matt Harper, CCIM, represented the landlord, Janaland, LLC, in a 60-month office lease for 1,700 SF at 6601 W. Indian School Road, Phoenix, AZ. The tenant, Cash Time Title Loans, Inc., was self-represented.

Laurel Lewis represented the tenant, One Community Media, LLC, in a 39-month office lease for 1,574 SF at 2600 N. Central Ave., Phoenix, AZ. The landlord, 2600 Tower, LLC, was represented by Michael Crystal with Cushman & Wakefield.

Joe Pequeno and Troy Giammarco represented the tenant, Step By Step WAC, LLC, in a 39-month office lease for 5,032 SF at 4201 N. 16^th St., Phoenix, AZ. The landlord, Bissuq Real Estate, LLC, was represented by Jamie Swirtz with CBRE.

Matt Harper, CCIM and Thomas Bean, CCIM, represented the landlord, Sun City Professional, in a 9-month office lease for 514 SF at 12630 N. 103^rd Ave., Sun City, AZ. The tenant, ALK Asphalt, LLC, was self-represented.

Matt Harper, CCIM, represented the landlord, Grand Center Plaza, LLC, in a 24-month retail lease for 1,107 SF at 11001 N. 99^th Ave., Peoria, AZ. The tenant, Pinnacle Solution, LLC, was self-represented.

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Phoenix’s top four industrial leases totaled 4.6 million sq. ft. – 2022 Sets Record for 1 Million-Sq.-Ft. Industrial Leases

PHOENIX – February 10, 2023 – Demand for industrial & logistics warehousing space is driving an increase in megawarehouses, according to a new CBRE report. Phoenix had four of the largest 100 industrial lease transactions in 2022.

Nationally, there were an unprecedented 63 signings for 1 million sq. ft. or more, up from 57 in 2021. This was a key finding in CBRE’s analysis of the 100 largest industrial & logistics leases completed last year. 

In 2022, Phoenix had four of the top 100 leases for a total of 4.6 million sq. ft. of industrial space, with two of the leases being traditional retailer/wholesalers. E-commerce had the largest square footage leased in the Valley at 1.2 million sq. ft., and third-party logistics (3PL) secured 1.2 million sq. ft. in Glendale.

“With four leases over 1 million sq. ft. in 2022, Phoenix is evolving into a retailer/wholesaler and distribution-focused market,” said Cooper Fratt, executive vice president at CBRE. “When selecting regional distribution center locations, Phoenix continues to attract occupiers with a robust and affordable labor market and fewer business regulations than other locations across the region.”

Representing over half of the top 100 leases, traditional retailers/wholesalers expanded their footprints to accommodate e-commerce sales growth and to hold more inventory to guard against supply chain disruptions. Third-party logistics (3PL) operators took second place, signing 18 of the top leases, up from 10 in 2021. E-commerce companies followed closely behind with 14 of the top 100, down from 21 in 2021.

Overall, the average size of the 100 top leases was 1.07 million sq. ft., compared to 2021’s previous record of 1.05 million sq. ft. Top markets for these leases included traditional mainstays like the Inland Empire, Chicago and Atlanta, as well as growing markets such as Dallas-Fort Worth, Phoenix and Columbus.

To read the full report, please click here.