Phoenix Commercial Office Space for Rent

Q3 2026

Q3 2026 Phoenix Commercial Real Estate Market Report

Focus: Q3 2026 Market Trends

Executive Summary

Greater Phoenix entered the second half of 2026 with improving fundamentals across every major property type: office vacancy falling at its fastest pace in more than a decade, industrial vacancy back below 10%, retail among the tightest in the nation, and apartment vacancy at a three-year low. Tenant demand on TenantBase shifted sharply in Q3: office space accounted for 39.0% of all Phoenix tenant searches, six times its 6.5% share in Q2.

Sector Snapshot

  • Office: Recovering. Vacancy fell to 25.4% in Q2, and office searches on TenantBase surged in Q3.
  • Industrial: Rebounding. Vacancy dropped to 9.6% in Q2 on 4.7 million SF of net absorption.
  • Retail: Tight. Vacancy is forecast at 5.2% for year-end, and retail remains the largest TenantBase search category at 55.8%.
  • Multifamily: Stabilizing. Vacancy hit a three-year low as deliveries slowed to their lightest midyear pace since 2022.

Phoenix Tenant Demand Index

The TenantBase Tenant Demand Index tracks what businesses in Greater Phoenix are actively searching for on the TenantBase platform each quarter. Because it measures tenant intent before leases are signed, it shows where demand is heading ahead of traditional vacancy and absorption data.

Q3 2026 Search Share by Space Type (July 1 to September 30, 2026)

  • Retail/Storefront: 55.8%
  • Office: 39.0%
  • Warehouse/Industrial: 5.2%

Three-Quarter Trend

  • Retail/Storefront: 58.3% in Q1, 59.9% in Q2, 55.8% in Q3
  • Office: 10.7% in Q1, 6.5% in Q2, 39.0% in Q3
  • Warehouse/Industrial: 32.3% in Q1, 34.5% in Q2, 5.2% in Q3

Key Takeaways

  • Office demand jumped sixfold quarter over quarter, from 6.5% to 39.0% of Phoenix searches, the largest single-quarter shift in any category this year.
  • Retail remains Phoenix's anchor category, holding above 55% of searches in all three quarters of 2026.
  • 3 to 5 year terms are the retail standard. They were the top retail lease term in Q1 (28.0%), Q2 (29.3%), and Q3 (32.5%).
  • Industrial interest cooled sharply, falling from 34.5% to 5.2% of searches even as the industrial market posted strong absorption.

Office Market

Phoenix office vacancy fell at its fastest pace in more than a decade in Q2 2026, the most recent quarter with published metro data, helped by steady leasing and older buildings being removed from inventory for redevelopment.

Key Metrics (Q2 2026)

  • Overall vacancy: 25.4%, down 70 basis points from Q1 (Cushman & Wakefield)
  • Net absorption: 450,074 SF (Cushman & Wakefield)
  • Average asking rent: $30.47/SF (Cushman & Wakefield)
  • Leasing activity: 1.5 million SF (Cushman & Wakefield)
  • New construction: No speculative office projects broke ground in Q2 (Newmark)

TenantBase Office Activity

Demand share: 39.0% of Phoenix tenant searches, up from 6.5% in Q2 and 10.7% in Q1.

Lease term preferences:

  • Less than one year: 47.5%
  • 3 to 5 years: 23.7%
  • 5+ years: 15.3%
  • 2 to 3 years: 13.6%

Space requirements by term:

  • Less than one year: 1,563 to 3,375 SF
  • 2 to 3 years: 1,667 to 3,500 SF
  • 3 to 5 years: 1,750 to 3,708 SF
  • 5+ years: 3,667 to 7,500 SF

Top locations: Chandler was the most requested single area among Phoenix tenants in Q3, followed by Downtown Phoenix, Tempe, Northwest Phoenix, and Mesa East. Many tenants searched broadly across the 44th Street, Airport, Arrowhead, and Camelback corridors.

TenantBase data vs. the market: Phoenix office searches on TenantBase are dominated by small users, with most requirements under 4,000 SF and nearly half seeking terms under one year. With metro vacancy above 25% and no new speculative supply, these tenants have strong leverage, especially in older Class B and C buildings where landlords are competing hardest. Tenants committing to 5+ year terms need roughly twice the space of short-term users and are in the best position to negotiate concessions.

Industrial & Warehouse Market

Phoenix industrial continued its recovery in Q2 2026 as demand outpaced new supply and vacancy fell back below 10%.

Key Metrics (Q2 2026)

  • Vacancy: 9.6%, down 70 basis points quarter over quarter and 260 basis points year over year (CBRE)
  • Net absorption: 4.7 million SF (CBRE)
  • Average asking rent: $1.09/SF per month (CBRE)
  • Under construction: 18.4 million SF (CBRE)
  • Notable leases: DHL signed about 1.2 million SF in the Southwest Valley (CBRE)

TenantBase Industrial Activity

Demand share: 5.2% of Phoenix tenant searches, down from 34.5% in Q2 and 32.3% in Q1.

TenantBase data vs. the market: Industrial absorption in Phoenix is being driven by large-block users taking hundreds of thousands to more than a million SF, while small and mid-size industrial searches on TenantBase dropped sharply in Q3. With 18.4 million SF still under construction, smaller industrial tenants should find more options and room to negotiate in the quarters ahead.

Retail Market

Phoenix ranks among the strongest retail markets in the country, with robust absorption, sustained rent growth, and historically low vacancy.

Key Metrics

  • Projected year-end 2026 vacancy: 5.2% (Marcus & Millichap)
  • Net absorption, first half 2026: 1.1 million SF (Marcus & Millichap)
  • Projected average asking rent: $20.80/SF, up 3.2% in 2026 (Marcus & Millichap)
  • Construction: 2.8 million SF delivering in 2026, nearly 90% preleased (Marcus & Millichap)

TenantBase Retail Activity

Demand share: 55.8% of Phoenix tenant searches, the largest category for the third straight quarter.

Lease term preferences:

  • 3 to 5 years: 32.5%
  • Less than one year: 23.8%
  • 5+ years: 22.5%
  • 2 to 3 years: 21.3%

Space requirements by term:

  • Less than one year: 500 to 1,000 SF
  • 2 to 3 years: 1,000 to 2,500 SF
  • 3 to 5 years: 1,333 to 2,833 SF
  • 5+ years: 10,167 to 10,500 SF

TenantBase data vs. the market: Phoenix retail demand on TenantBase splits into two groups: small-format tenants under 3,000 SF on terms of five years or less, and larger operators seeking roughly 10,000 SF on 5+ year commitments. With nearly all new construction already preleased and vacancy forecast at 5.2%, larger-format tenants face the tightest competition. Short-term retail searches also rose from 14.0% in Q2 to 23.8% in Q3, as more operators look for flexible ways into a tight market.

Multifamily Market

  • Vacancy: three-year low in the first half of 2026 (Northmarq)
  • Absorption: more than 12,400 units year to date through Q2 (Northmarq)
  • Deliveries: fewer than 6,700 units in the first half of 2026, the lightest midyear total since 2022 (Northmarq)

With construction at its lowest level since early 2021 and second-half deliveries expected around 7,000 units, half the pace of late 2025, rents posted modest gains in each of the first two quarters.

Q4 2026 Outlook

  • Office: Expect vacancy to keep easing as obsolete buildings leave inventory, with the Q3 surge in tenant searches pointing to more small-suite leasing.
  • Industrial: Expect continued absorption from large users, while the construction pipeline keeps options open for smaller tenants.
  • Retail: Expect vacancy to stay near historic lows and rents to keep rising, especially in the East Valley, North Phoenix, and West Valley.
  • Multifamily: Expect occupancy and rent growth to firm further as deliveries fall.

Frequently Asked Questions

What type of commercial space are Phoenix tenants searching for in 2026?

In Q3 2026, retail/storefront space made up 55.8% of Phoenix tenant searches on TenantBase, followed by office at 39.0% and warehouse/industrial at 5.2%. Office demand rose sixfold from 6.5% in Q2.

What lease terms do Phoenix office tenants want?

47.5% of Phoenix office tenants on TenantBase sought terms under one year in Q3 2026, while 39.0% sought terms of 3 years or longer.

What lease terms do Phoenix retail tenants want?

3 to 5 year terms were the most requested retail lease length on TenantBase in every quarter of 2026, reaching 32.5% of Phoenix retail searches in Q3.

What is the office vacancy rate in Phoenix?

Phoenix office vacancy was 25.4% in Q2 2026, down 70 basis points from Q1, with an average asking rent of $30.47/SF, according to Cushman & Wakefield.

What is the industrial vacancy rate in Phoenix?

Phoenix industrial vacancy was 9.6% in Q2 2026, down 260 basis points year over year, according to CBRE.

How can I find commercial space in Phoenix at no cost?

TenantBase matches business tenants with vetted independent tenant rep brokers across Greater Phoenix at no cost to the tenant. Brokers are compensated by the landlord. Get started with TenantBase.

Sources

  1. TenantBase proprietary search data, Phoenix, July 1 to September 30, 2026
  2. TenantBase, Phoenix Commercial Real Estate Market Report, Q2 2026
  3. TenantBase, Phoenix Commercial Real Estate Market Report, Q1 2026
  4. Cushman & Wakefield, Phoenix Office MarketBeat, Q2 2026
  5. RealtyWire, Phoenix Office Vacancy Falls Third Straight Quarter (Newmark Q2 2026 data) (July 27, 2026)
  6. CBRE, Phoenix Industrial Figures, Q2 2026
  7. Real Estate Daily News, Phoenix Retail Market Remains Tight (Marcus & Millichap Q3 2026 data) (September 4, 2026)
  8. Northmarq, Phoenix Multifamily Vacancies Tighten, Q2 2026 (August 7, 2026)

Disclaimer

Information in this report is aggregated from third-party sources and TenantBase proprietary platform data, and was synthesized with the assistance of AI. Market metrics reflect the most recent published data available at the time of writing. TenantBase search data reflects tenant activity on the TenantBase platform and is not a measure of total market leasing. All figures should be independently verified before making real estate decisions.