By Jessica Beebe | Bisnow
Office conversions in Phoenix are mounting as investors seek to leverage a swath of outdated buildings to meet the needs of a growing population and recovering industrial market.
Since 2024, 3.3M SF of office space has been converted or demolished in metro Phoenix, more than the previous 10 years combined, according to a Cushman & Wakefield report. Another 4.1M SF of projects are proposed, making the city one of the most active conversion and demolition pipelines in the U.S.
“In Phoenix, the conversion trend is being driven by a reevaluation of how certain well-located office sites are best utilized,” Josh Craft, senior research analyst at Cushman & Wakefield, told Bisnow.
“Recent challenges in the office market have accelerated that process, motivating investors and developers to capitalize on redeveloping them into alternative uses,” he said.
The ongoing projects are helping to rebalance Phoenix’s office market by eliminating excess supply as the region continues its post-pandemic recovery. In the first quarter, direct office vacancy dropped 60 basis points from the previous quarter to 14.5%, according to a Q1 Colliers report.
The offices being redeveloped or removed are typically high-vacancy with upcoming loan maturities, according to Cushman & Wakefield. Their removal frees up land and capital to build new housing for a surge in residents, with the population forecast to reach about 4.9 million people this year.
Developers are also tearing down buildings to make way for warehouses and other industrial sites, hoping to capitalize on Taiwan Semiconductor Manufacturing Co.’s multibillion-dollar chipmaking project.
