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6/24/25
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Here is a quick take on the office to residential conversion trend in Phoenix. This overview was provided by real estate services firm Avison Young.
• As Phoenix’s office vacancy rate climbed from 14.8% in Q1 2020 to nearly 25% in 2025, developers have increasingly turned to adaptive reuse as a solution to oversupply.
• The current pipeline includes over 1,600 residential units proposed or completed across at least eight major office conversion projects, such as Alloy Midtown (completed) and Kierland Sky (proposed 420 units).
• With most of these projects still in the planning phase and only one fully delivered, the lag between concept and construction reflects more than market hesitancy, highlighting the technical, financial, and regulatory friction inherent in these deals. Many aging office buildings have deep floor plates, poor window lines, or zoning limitations that make residential layouts inefficient or cost-prohibitive. Coupled with higher interest rates and construction costs, even motivated developers face major barriers to execution.
• Streamlining zoning approvals, providing financial incentives, and investing in predevelopment studies can speed up project timelines and improve conversion rates. As demand shifts to Trophy/A+ properties, lower-class spaces become less attractive, highlighting the need for strategic planning in property development and conversions.
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