➤ Key Highlights
Q1’26 leasing rose 14% year over year to 249.8M SF — a pace for a record year.
Net absorption rebounded to 43.1M SF but stayed below the long-run quarterly average.
Build-to-suit is climbing; nearly one-fifth of 500K-SF-plus deals are build-to-suit.
Phoenix logged 7.5M SF leased and 4.4M SF absorbed in a single quarter.
Phoenix deliveries fell 82% year over year, pulling vacancy down 120 bps to 12.4%.
➤ The Signal
Record leasing with soft absorption means occupiers are trading up, not expanding.
The cycle’s growth phase is over; the sorting phase has begun.
Quality and location now decide which boxes win tenants.
A record leasing year usually signals a booming sector. This one doesn’t, and the gap between the two numbers is the whole story. Companies are signing space at a furious pace while net absorption — the figure that captures actual footprint growth — lags its own average.
The reconciliation is flight-to-quality. Occupiers are leaving older, less efficient boxes for newer, automated, better-located ones. A lease gets signed, but no net square footage is added to the economy. That is sorting, not growth.
Phoenix shows the supply side of the same dynamic: a supply pause — deliveries down 82% — lets demand tighten an oversupplied market without any new construction. Discipline, not expansion, is fixing the vacancy.
➤ Implications
Modern, well-placed product firms first; commodity bulk in weak submarkets keeps competing on concessions. Underwriters should watch net absorption and build-to-suit share — not headline leasing — to read true demand.
➤ Key Takeaway
When leasing breaks records but absorption doesn’t, the tenants are moving up — not multiplying.
Source: JLL / CBRE / Cushman & Wakefield — Q1–Q2 2026
