Arizona’s commercial real estate market finds itself at a crossroads. Post-pandemic shifts in office usage, rising interest rates and mounting lease disputes have created a perfect storm for property owners, tenants and lenders alike. As these challenges intensify, companies across the state should consider turning to alternative dispute resolution (ADR) as their preferred legal strategy.  

In a state known for its rapid growth and dynamic business climate, ADR offers a smarter, faster and more collaborative way to resolve real estate conflicts, without the cost and complexity of traditional litigation. Early mediation of disputes can lead to a cost-effective resolution, avoiding prolonged and expensive litigation in the courts.  

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Post-Pandemic Office Shake-up

The pandemic reshaped how businesses use physical space, and this is especially true in Arizona. Remote and hybrid work models have led to reduced demand for office square footage, especially in Phoenix and Tucson. According to recent data, office vacancy rates in the Metro Phoenix area have climbed to over 20%,[1] causing many companies to downsize, renegotiate leases or abandon properties altogether.

This shift has triggered disputes over lease terms, rent obligations and early terminations. In many cases, litigation often proves too slow and adversarial. Mediation, by contrast, provides a neutral forum where landlords and tenants can work toward mutually beneficial solutions—such as rent reductions, deferrals, space reconfigurations or early exits without penalties. If the dispute cannot be resolved through mediation, arbitration is a more cost-effective alternative to litigation. Typically, most arbitrated matters can be decided in months rather than years. The arbitration rules of many ADR providers limit the size and scope of discovery and mandate a mutual exchange of information prior to the arbitration hearing.[2]

Rising Interest Rates and Financial Pressures

Like the rest of the country, Arizona’s real estate market has felt the sting of rising interest rates. As borrowing costs climb, property values soften and financing becomes more difficult. Commercial property owners, especially in the office and retail sectors, are facing increased loan defaults and distressed assets.[3] ADR offers a strategic alternative to courtroom battles. In foreclosure or commercial loan restructuring scenarios, mediation allows lenders and borrowers to negotiate outcomes that preserve value and avoid reputational damage. Again, if mediation is unsuccessful in resolving the dispute, arbitration is a more cost-effective solution. These processes are faster and more flexible than judicial proceedings, which can be rigid and time-consuming.

Why Businesses Should Prefer ADR

The appeal of ADR for Arizona’s real estate sector is rooted in several key advantages:

•          Speed and efficiency: ADR moves faster than litigation, which is critical when time-sensitive decisions, like lease renegotiations or asset sales, are on the line.

•          Cost savings: Legal fees and court costs in protracted litigation can be prohibitive. ADR typically requires fewer resources, making it a more economical choice for businesses.

•          Industry experience: Parties can select mediators or arbitrators with experience in real estate matters.

•          Confidentiality: ADR proceedings are private, allowing companies to protect sensitive financial and strategic information.

•          Relationship preservation: ADR fosters dialogue and compromise, which is especially valuable in ongoing landlord-tenant or lender-borrower relationships.

•          Customization: ADR offers a tailored approach, allowing the parties to design a process that fits the dispute’s complexity.

Creative Solutions for Complex Cases

One of ADR’s greatest strengths is its flexibility. Experienced mediators can guide parties toward innovative settlements that courts may not be empowered to impose. For example, a Phoenix-based landlord and tenant might agree to a revenue-sharing lease model, or a lender in Scottsdale might restructure a loan to avoid foreclosure.

Veteran mediators will emphasize the importance of creativity and collaboration. This approach often involves multistep negotiation strategies tailored to the realities of the market, which is beneficial to the fast-evolving commercial real estate sector.

ADR’s Growing Role in Arizona’s Legal Landscape

Arizona courts are increasingly supportive of ADR. Programs like the one offered by the Maricopa County Superior Court’s Alternative Dispute Resolution Office[4] provide mediation and arbitration services to help parties resolve disputes outside of trial. These initiatives reflect a broader trend toward efficiency and collaboration in the state’s legal system.

Private ADR services are also thriving in Arizona, with providers offering support in real estate, construction and commercial law. For companies seeking resolution outside the constraints of the courtroom, these services are valuable resources.

ADR Is a Smarter Legal Strategy for Arizona Businesses

As Arizona’s real estate market continues to evolve, companies need legal solutions that are agile, cost-effective and relationship-oriented. Mediation and arbitration meet these needs head-on, offering a smarter path forward in an increasingly complex environment.

Whether navigating lease disputes, loan defaults or asset restructuring, Arizona businesses should realize that ADR isn’t just an alternative to litigation; it’s often the best option.

Author: Rian W. Jones, Esq. serves as a mediator, arbitrator, neutral evaluator, judge pro tem, referee and special master at JAMS. He joined after a 39-year career as a trial attorney, where he handled complex matters including construction defect, personal injury, commercial disputes, toxic torts and homeowners association cases. 

[1] CBRE Phoenix Office Figures, Q2 2025, July 11, 2025

[2] See, e.g., JAMS Comprehensive Arbitration Rules & Procedures, https://www.jamsadr.com/rules-comprehensive-arbitration/

[3] “Rising Double Defaults Test Banks’ Commercial Loan Stability,” CRE Daily, Nov. 8, 2024

[4] https://superiorcourt.maricopa.gov/court-resources/services/adr/