July 27, 2026
Office vacancy in Phoenix has now declined for three consecutive quarters, landing at 23.4%, down from 25.4% a year earlier. On paper, that sounds like a healthy office market. Look closer at a recent Newmark report, though, and the real story is less reassuring: leasing activity actually came in well below prior-year levels. The vacancy drop is being driven almost entirely by older office buildings being pulled out of service and redeveloped into something else entirely.
A Sun Belt Pattern, Not a One-Off
Since 2024, more than 3.3 million square feet of Phoenix office space has been converted or demolished — more than the prior decade combined — with another 4 million square feet of conversions in the pipeline. It's a pattern showing up across fast-growing Sun Belt metros generally: aging, single-purpose office stock that can't compete for tenants gets removed from the market rather than re-leased.
A Two-Tier Market
The providers who do want office space aren't spreading demand evenly. Newer, amenity-rich, Class-A buildings are still leasing quickly, and asking rents for that top tier rose 2.2% year over year to $31.70 per square foot. Meanwhile, older buildings are cutting prices just to hang on to tenants — and increasingly losing that fight altogether, which is exactly why they're being converted.
What This Means Beyond Phoenix
This isn't really a story about one city's vacancy rate. It's a signal about what happens to conventional, static office space when it stops matching how people actually want to work — a dynamic independent healthcare providers should pay close attention to before signing a multi-year lease. Committing to space in a building that could just as easily be a redevelopment target in five years is a real risk, and it's one more reason the long-term-lease model looks shakier by the year.
Flexible Medical Space Sidesteps the Problem Entirely
Instead of betting on a single building's fate over a 3-, 5-, or 10-year lease, providers can choose space that's built to flex with them from day one. At Elite Medical Suites, that means fully equipped exam and consultation rooms available by the hour, part-time, or full-time, with no long-term lease and no exposure to a landlord's redevelopment plans. As conventional office real estate keeps sorting itself into winners and conversions, flexible clinical space remains the model that doesn't ask you to guess which one your building will be.
"Phoenix Office Vacancy Continues Decline Despite Sluggish Leasing" by Jessica Beebe, Bisnow. Photo: "Downtown Phoenix Skyline" by Alan Stark (CC BY-SA 2.0) — read the original
Elite Medical Suites — fully equipped, flexible clinic suites for medical and wellness providers in Las Vegas.