• Total vacancy fell 400 bps during 2025 as Tempe begins to tighten more rapidly than the overall market. • Rent growth returned as leverage shifts in favor of landlords. • More than half of the positive net absorption that occurred in Phoenix in 2025 was generated by occupancy gains in Tempe. • The development pipeline remained relatively active with 442,449 s.f. underway, and new deliveries were fully preleased, reinforcing confidence in welllocated, high-quality projects. Phoenix (Tempe) Office Market Trends Tempe saw a sharp rebound in momentum in 2025, with absorption surging and vacancy rates falling by 400 bps, as leasing activity continued to concentrate in the most competitive space and locations. Direct average asking rents surged to $45.41 p.s.f., as newer space begins to quickly become scarce throughout the submarket. Market performance continues to be highly stratified according to asset quality, but favorable location dynamics in Tempe are leading to relatively strong performance even in lower-quality buildings. While the Class A and Trophy market saw the most occupancy gains on a percentage basis, Class B assets in Tempe saw over 300,000 s.f. of occupancy gains in 2025, and rents grew by 5.0%. Gains in Class B were largely driven by one prominent sublease removal, without true expansionary demand in the same vein as the Class A market. Net absorption for the year surpassed 400,000 s.f., reflecting steady tenant movement despite continued conversions. Development activity remained measured but active, with 442,449 s.f. underway, signaling confidence in well-located projects. Concessions were largely unchanged, and leasing momentum was the strongest in the metro as companies prioritize access to labor, universities, and innovation corridors. Mixed-use and highly accessible locations remain preferred as occupiers prioritize convenience, efficiency, and longer-term sustainability objectives. Outlook Tempe’s technology composition has led to more intense cyclical swings over the past three years, but the market is currently recovering quickly from cyclical highs in vacancy from 2024. Sublease availability fell by nearly 30% in 2025, and few high-end availabilities remain. Positive absorption is expected throughout 2026 with planned expansions and an influx of growing technology companies with active requirements. However, tech tenants are focused on amenitized Class A buildings and university-adjacent innovation districts. Call center employment, a major driver of Class B demand, has been stagnant in the face of AI adoption, with more limited return to normal attendance than the broader private sector, undermining the recovery for Class B and Class C assets in Tempe. MUST's Submarkets Overall Market Statistics Forecast 2025 net absorption (s.f.) 708,536 Under construction (s.f.) 442,449 Total vacancy (%) 23.0% Sublease vacancy (s.f.) 3,979,341 Asking rent (US$ p.s.f.) US$30.73 Concessions Stable Net Absorption and Overall Vacancy Rates Gross Leasing Activity Rental Rates and Going-in Yields CBD Class A cap rate (%) Cap rate Asking rent 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 8% 7% 6% 5% 4% 30% 25% 20% 15% 10% 5% 0% $50 $45 $40 $35 $30 $25 $20 2010 2014 2018 2012 2016 2020 2022 2024 Tempe Rest of Market 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 5.2M 5.6M 6.4M 7.4M 3.8M 4.1M 4.4M 5.1M 5.4M 4.7M 0.7M 1.4M 1.0M 1.5M 0.8M 1.1M 1.1M 0.7M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Net absorption (m.s.f.) Total vacancy (%) 0.9M 0.7M INDEPENDENT MARKET REPORT By JLL as at 31 December 2025 / 44 / EXPANDING HORIZONS
RkJQdWJsaXNoZXIy NTM2MDQ5