Phoenix Office Developers Lean On Retail As An RTO Incentive
Developers are considering using ground-floor retail to give their new office developments a boost in metro Phoenix.
When a new office is being developed, it is often packaged as part of a mixed-use property, according to developers speaking at Bisnow’s Phoenix Office Forum at the Hilton Scottsdale Resort & Villas on April 30.
Retail can be an incentive to bring workers back to the office, said Nick Nudo, vice president at Lincoln Property Co.
“Most leadership wants the staff in the office to build the community and for employee retention,” Nudo said. “So, the draw of the space is important, and landlords are asking how they can attract them to the building.”
Phoenix’s office market is stabilizing following years of post-pandemic struggle, but development of standalone Class-A office space in the city remains limited.
In a Q1 2026 report, Savills analysts found that “limited new speculative construction” will keep availability low. Overall office availability decreased 3.6% year-over-year when compared to Q1 2025, the report states.
Several newly constructed or renovated mixed-use buildings across the region feature retail tenants on the ground floors. For example, the planned Central Park project in uptown Phoenix will include 245K SF of office space, 78K SF of ground-floor retail space and 1,450 residences. And the City Square office park in midtown, redeveloped last year, boasts 775K SF of office space across three towers, as well as a hotel and retail plaza.
Tenants are largely drawn to these mixed-use campuses because of the array of retail options and walkable outdoor space, said Jessica Morin, head of occupier research at Newmark. The retail component, especially, offers convenience to people spending their days working in an office, she said.
“You have all your retail needs right there,” Morin said. “You can pick things up on your lunch break or on the way home, and it’s not as much of a burden.”
While some offices already offer amenities, many employees would rather shop somewhere other than the company store, said Jeff Moloznik, senior vice president of development at RED Development.
“Nothing can replace the ability to walk out and actually go to a true independent third-party retailer,” Moloznik said. “You don’t always want to be in that captive environment.”
Overall, Phoenix’s office market had its strongest net absorption since 2019 in Q4 2025, with 531K SF absorbed, according to Colliers. That momentum carried over into the new year, with 136K SF of absorption in Q1 2026, CBRE reports.
The metro area’s retail market also has been strong in Q1 2026, according to a Kidder Matthews report. The average asking rent grew nearly 7% year-over-year, reaching $1.73 a SF per month. The retail market had 318K SF of net absorption in the quarter, the report states.
