From a commercial real estate perspective, the office and hotel markets display significant differences in performance. In the current market, however, there’s a common thread between them: Both have formed what economists call a K-shaped recovery—a split between the haves and have-nots.
Office: A Flight to Quality
On a national basis, office has been a story of “the bigger they are, the harder they fall.” A CoStar analysis of buildings sold last year found a $4.7 billion drop in value—an aggregate decline of 24%—compared with the properties’ previous sale prices dating back to 2010. The poor performance was most stark in buildings over 200,000 SF and worst above 500,000 SF. In contrast, two-thirds of smaller building sales (particularly under 50,000 SF) were profitable, with an average price of $475/SF and a 17% return.
In general, Phoenix is outperforming the national figures, but parallels can be seen in the Camelback Corridor vs. Midtown. The businesses that need a Camelback address to be “part of the scene,” such as banking, financial planning, real estate, insurance, legal and other financial services businesses, are willing to pay to be in expensive, highly amenitized buildings—and are willing to shrink their footprint to set up shop in the better location.
Midtown, meanwhile, has far more large multi-tenant properties that are difficult to reposition. You have leases on multiple terms. How do you get everybody out at the same time? How do you address the entrances and common-area amenities while still providing access to the public? Even Midtown properties that have undergone significant capital improvements are undergoing price discovery. Thirty 03, a 26-story, Class A multi-tenant high-rise office building at 3003 North Central Ave. sold for $32.25 million at the beginning of February, a 24% drop since its previous sale in March 2019.
All indications are that the office market has reached a bottom in Phoenix. Aggressive investors are acquiring, but there is some distance from prior pricing.
Hotels: High-End Soars While Limited-Service Lags
Hotels are mirroring the same dynamic. At high-end hotels, people are still spending money. They have plenty of liquidity and disposable income, and they’re going on vacation. Limited-service hotels, in contrast, are suffering along with lower-income households. In 2025, RevPAR (revenue per available room) fell 4.4% in economy-class hotels, according to CoStar.
It’s interesting to note that luxury travel advisory Embark Beyond’s Q4 2025 Travel Trends Report describes a split even within luxury. Product targeted at the ultrawealthy is performing better than that for the aspirational luxury traveler, such as base-rate deluxe rooms.
On the surface, the office and hotel segments could not be more different. But in the current environment, businesses and people who are doing well financially also have the ability to maintain their status quo. For those who are not, the current market is a struggle—and they will need to make adjustments to return to balance.
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