The Phoenix office market saw a rise in leasing activity to near pre-pandemic levels during the fourth quarter of 2021. This led to the first decline to the market wide vacancy rate in over six quarters. Finishing 2021 at 14.0%. Since the onset of the pandemic many businesses have transitioned to remote work and postponed long-term real estate decisions causing a surge in vacancy and available sublease space. Despite the influx of availability, rental rates have largely remained stable year-over-year. Recent increases in tenant improvement costs due to building material and trade labor shortages have impacted landlords in reducing rents. Alternatively, to generate activity many landlords have turned to offering tenants increased concessions and flexibility on lease terms. With encouraging signs of more businesses returning to the office the outlook for the Phoenix office market is optimistic for 2022.
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