East Valley Office Market Update

The East Valley office market has stopped getting worse, but it has not turned yet. Vacancy across the East Valley's 24.5 million square feet of office sat at 24.0% in the third quarter of 2026, with average asking rents of $33.13 per square foot, full service (Kidder Mathews).

The bigger story is supply. No new office space was delivered anywhere in the Valley last quarter, and only about 40,000 square feet is under construction metro-wide (CBRE). Meanwhile, older buildings are being torn down or converted. For owners of well-located, updated buildings, that sets up a stronger position over the next two to three years. For owners of dated, commodity space, the path back is longer.

East Valley by the numbers

Tempe and Chandler hold most of the East Valley's office space, and both still sit above 22% vacancy. Smaller pockets like Downtown Mesa run much tighter.

Source: Kidder Mathews Phoenix Office Market Report, Q3 2026. Gilbert is not reported as its own submarket.

For context, the metro as a whole ended the quarter at 23.7% vacancy and $31.66 per square foot, with 0 square feet delivered. Each research firm tracks a different set of buildings, so their vacancy figures differ. C2 Brokerage, for example, reports 18.6% direct vacancy for the metro. Compare trends within one source, not numbers across sources.

Submarket snapshots

Tempe

Tempe is the East Valley's largest office market and its most active. C2 Brokerage named it the metro's top submarket for absorption through the first three quarters of 2026, at 352,000 square feet. Tempe also carries the largest sublease inventory of any major market, about 695,000 square feet in Cushman & Wakefield's Q2 count (ICRE). Older campuses are leaving the office market: Panattoni paid $37.5 million for the 25-acre former State Farm campus, about 462,000 square feet of office.

Chandler and Gilbert

Chandler's vacancy of 22.6% understates what is coming, because 29.1% of its space is available, including space not yet empty. Still, the Price, Chandler and Gilbert corridors absorbed about 192,000 square feet in Q2, and vacancy there fell 230 basis points to 25.2% in Cushman & Wakefield's count (ICRE). Medical office is the bright spot: Chandler medical office vacancy was 11.6% at $37.30 per square foot (Kidder Mathews).

Mesa

Downtown Mesa is one of the tightest office pockets in the Valley at 13.3% vacancy, though at the lowest rents in our table. East Mesa is small, about 1 million square feet, so a few buildings swing its numbers. Kidder Mathews shows 34.4% vacancy there, while Cushman & Wakefield's Q2 count showed 20.8%.

South Tempe and Ahwatukee

This was the only East Valley submarket with meaningful positive absorption in Q3, adding about 24,700 square feet, at the most affordable rents among the larger submarkets.

Queen Creek and the Superstition Corridor

Cushman & Wakefield put the Superstition Corridor at 23.6% vacancy in Q2, with rents near $23.54 per square foot (ICRE). Demand here leans toward medical and neighborhood professional space that follows new rooftops.

What is moving the market

• Construction has nearly stopped. About 40,000 square feet is under construction Valley-wide, and no speculative project is underway (CBRE, C2 Brokerage). C2 estimates new buildings would need starting rents of about $70 per square foot to pencil, more than double what quality space leases for today.
• Old space is leaving. About 3.3 million square feet across 37 Valley buildings has been demolished or converted since 2024, mostly to industrial and apartments. Another 4.1 million square feet is proposed for removal (ICRE).
• Sublease space is shrinking. Metro sublease availability has fallen from a peak of about 7 million square feet to under 4 million (C2 Brokerage).
• Office jobs are growing again. Office-using employment rose 1.3% year over year in July, the fastest pace since mid-2022 (Kidder Mathews).
• Medical office keeps outperforming. Metro medical office vacancy was 15.2% in Q3, well below the 23.7% overall rate, and rents were up about 5% year over year (Kidder Mathews). East Valley population growth keeps that demand coming.
• Smaller and older buildings are fuller. Class C vacancy is 11.1% and Class B is 18.5%, while Class A is 28.3%. Buildings under 100,000 square feet run about 18% vacant, against about 29% for larger ones. Big Class A space is still where most of the empty floors are.

Almost nothing new is being built, and old space keeps leaving. That favors owners of updated, well-located buildings.

What it means for owners

The right move depends on what you own. Here is how we see it today.

1. Small, updated buildings and office condos. You are in the strongest part of the market. Buyers are back: Valley office sales volume is up 14.9% year to date by square feet (Kidder Mathews). If you have been waiting to sell, the window is reasonable now.
2. Medical office. Demand is steady and new supply is limited to mostly preleased projects. Holding a well-leased medical building is a solid position, and selling one draws real interest.
3. Large Class A space with vacancy. Leasing is what moves your value. Concessions and a fast, flexible deal will win tenants faster than holding out on rent.
4. Dated Class B and C buildings. Decide whether to reinvest or reposition. A targeted refresh of lobbies, restrooms and spec suites can compete with Class A at a lower rent. For some sites, the land or a conversion is worth more than the building.
5. Any owner with leases rolling soon. Renew key tenants early. Buyers discount near-term rollover, and today's tenants have options.

The outlook

We expect East Valley vacancy to drift down slowly through 2027, not snap back. Almost nothing new is being built, old space keeps leaving, and office employment is growing. The gains will go first to well-located, updated buildings and medical space. Large blocks of older commodity space will take longer to fill, and some of it will leave the office market for good.

For a full review and a broker opinion of value, call us at 520-262-3488 or contact Ironwood Strategic Advisors.

Sources

• Kidder Mathews, Phoenix Office Market Report, Q3 2026
• Kidder Mathews, Phoenix Medical Office Market Update, 3Q 2026
• CBRE, Phoenix Office Figures, Q3 2026
• C2 Brokerage, Phoenix Metro Office Market Update, Q3 2026
• ICRE, Phoenix Office Construction Has Nearly Stopped (Oct. 15, 2026), summarizing Cushman & Wakefield, Newmark and Colliers research
• AZ Big Media, Phoenix office market moves closer to stabilization (Oct. 24, 2026)

This article is general market commentary, not legal or investment advice. Figures are from the third-party research listed above and may be revised.