While many major U.S. office markets continue to struggle with high vacancies and elevated listing rates, Phoenix remains one of the few large metros where asking rents fall below the national benchmark. This distinction is drawing attention from both tenants and investors searching for value in an otherwise uneven landscape.

According to the latest CommercialCafe Office Report, the national vacancy rate reached 18.7% in August, though that figure reflects slight improvement year-over-year. Western markets, however, continue to post higher-than-average vacancies. Seattle led the pack with more than 27% of office space unoccupied, followed closely by San Francisco at nearly 26%.

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Key Regional Findings

  • San Francisco recorded the highest average asking office rents in the West at just over $64 per square foot, almost double the national average of $32.63.
  • By contrast, Phoenix, Denver, and Portland were the only major Western markets where asking rents remained below the national average, each landing around $29 per square foot in August.
  • The Bay Area led the region for transaction activity, with more than $3.4 billion in office deals closed year-to-date. Sale prices here also topped the charts, averaging $378 per square foot.
  • In terms of development, California markets dominated: Los Angeles (2.1 million square feet under construction), San Diego (1.8 million), and San Francisco (1.5 million) were the only Western metros with pipelines exceeding one million square feet at the start of September.

Broader Market Takeaways

Nationally, the picture remains mixed:

  • The average U.S. asking rent was $32.63 per square foot in August, reflecting a slight dip of 0.4% year-over-year.
  • Roughly 40 million square feet of office space was under construction nationwide, a relatively modest pipeline by historic standards.
  • Manhattan topped the nation in total dollar volume of sales through August, at nearly $5 billion, followed by the Bay Area ($3.4 billion) and Washington, D.C. ($3.1 billion).
  • Seattle, Austin, and San Francisco reported the highest vacancy rates, each above 25%.
  • The Boston metro had the largest construction pipeline in the country, with 5.6 million square feet underway.

Phoenix: A Value Play in Today’s Market

Phoenix’s ability to keep rents below the national average, even as vacancy remains elevated, sets it apart from many of its Western peers. For occupiers, this means access to competitive space in a fast-growing metro without the premium pricing seen in hubs like Manhattan, San Francisco, or even Los Angeles.

The city’s affordability could be especially appealing to firms seeking to downsize from higher-cost markets while maintaining a strong talent pipeline. Phoenix offers a large labor pool, relative proximity to California markets, and a growing reputation as a business-friendly metro.

For investors, the dynamics are equally notable. As high-cost markets wrestle with elevated vacancy and sluggish leasing, Phoenix’s combination of lower rents and population growth may help stabilize occupancy rates and attract tenants who would otherwise be priced out of coastal gateways.

If these trends hold, Phoenix could position itself as one of the few large Western markets where value, scalability, and long-term growth intersect, making it a city to watch closely in the months ahead.