Tempe quietly did the heavy lifting for Metro Phoenix's office market in the fourth quarter of 2025, pulling in roughly 185,000 square feet of net absorption as tenants chased newer, walkable space. That demand helped the region notch a rare positive quarter even as overall vacancy stayed elevated, and it left amenity-rich submarkets looking tighter than they did a year ago. The result is a widening split between high-end Class A buildings and older properties that landlords are now repurposing or pitching more aggressively to cost-conscious tenants.
Kidder Mathews' Q4 snapshot
A Q4 2025 market report from Kidder Mathews shows Tempe logged 184,600 square feet of net absorption and accounted for most of the metro's roughly 211,540 square feet of positive absorption in the quarter. The same report pegs total office vacancy in the Phoenix market at about 23.6%, with Class A product posting the strongest gains over the period.
Why Tempe is winning
Michelle Gardner, senior vice president at Kidder Mathews, told Bisnow that Tempe's walkability, proximity to talent pipelines and mixed-use neighborhoods are doing a lot of the leasing legwork. She noted that sublet activity in Tempe remains robust because it offers companies flexibility and, in her words, "a path back into direct leasing."
Conversions, sublets and tightening inventory
Kidder Mathews' analysis points out that limited new office deliveries, including no new completions in Q4, combined with conversions or repurposing of outdated buildings, have effectively pulled space out of the inventory. That shift is speeding up a "flight to quality" as tenants trade up into better buildings. The resulting structural tightening, along with stronger sublet absorption, is putting upward pressure on rents for the best space across the Valley. According to Kidder Mathews, owners are increasingly repositioning older assets or selling them to buyers who will.
Big relocations are filling space
Corporate moves are translating into real occupancy on the ground. Comtech announced it is moving its headquarters to Chandler into a roughly 150,000-square-foot innovation facility, according to the company. Comtech's announcement confirms both the size and the purpose of the site. Dutch Bros consolidated corporate operations in Tempe with a full-building lease of about 136,000 square feet at Liberty Center at Rio Salado, according to industry coverage. The Real Deal reported on that deal. And Cognite set up a roughly 30,000-square-foot headquarters in Hayden Ferry Lakeside III, per the company's press release and related materials from Cognite.
What landlords and tenants should watch
Local brokerage analysis suggests landlords are likely to keep pouring attention into amenity-rich, Class A space, while investors hunt for value-add and owner-user plays in well-located suburban submarkets. That near-term outlook mirrors coverage of the Kidder Mathews report by industry outlets, which highlight rising owner-user interest and selective investment activity. Real Estate Daily News summarizes those implications for the broader market.
For Tempe, the next stretch will reveal whether that Q4 momentum holds as more companies land or expand in the city. For landlords and tenants alike, the market is clearly rewarding quality and flexibility - and longer direct leases or a steady sublet pipeline will be the key signals to watch.
