SOUTHWEST U.S. OFFICE MARKET REPORT – Q1 2026

The Southwest U.S. office market entered Q1 2026 with the second-strongest fundamentals among the five U.S. office regions tracked in this institutional research series, behind the Southeast aggregate but ahead of Midwest, Northeast, and West Coast comparables. Dallas-Fort Worth registered the strongest net absorption in absolute square footage terms among Southwest metros, driven by corporate relocation completions, financial services consolidations into Uptown and Frisco trophy submarkets, and selective technology sector expansion through 2025 and into Q1 2026. Aggregate Southwest direct vacancy held in the high-teens range, with trophy submarkets compressing into the low teens to mid-teens for the highest-quality Class A+ inventory and Class B suburban commodity inventory holding above twenty percent across most metros.

Dallas-Fort Worth's Q1 2026 office market reflected the most pronounced corporate relocation absorption story in the United States. Uptown Dallas, Plano, Frisco, and the Las Colinas corridor sustained positive trophy and Class A+ absorption, with financial services, healthcare administration, professional services, and selective technology tenants representing the dominant demand cohort. Goldman Sachs's Dallas trophy commitment, Wells Fargo's Irving consolidation, JPMorgan's Plano expansion, and Charles Schwab's Westlake corporate campus continued representing meaningful demand anchors through 2025 and into Q1 2026. Toyota, AT&T, and Caterpillar corporate headquarters demand sustained Plano, Las Colinas, and Frisco trophy fundamentals. The Dallas suburban Class B reset continued in older suburban Richardson, Addison, and Far North Dallas commodity inventory.

Austin's Q1 2026 office market reflected the most pronounced supply digestion story among Southwest metros. The 2023-2025 trophy and Class A delivery pipeline in downtown Austin, the Domain corridor, and East Austin had been substantial, with several institutional research benchmarks placing aggregate Austin office supply additions among the highest per-capita levels in the United States. Q1 2026 marked an early supply digestion inflection, with positive absorption modestly outpacing delivery additions for the first complete quarter since 2022. The Domain trophy submarket sustained the strongest absorption among Austin office submarkets, with technology, financial services, and consumer brands representing the dominant demand cohort. Downtown Austin trophy product sustained positive absorption through Q1 2026, while older suburban Cedar Park, Round Rock, and southwest Austin commodity inventory continued the national reset trajectory.

Houston's Q1 2026 office market reflected the early stages of a multi-year energy corridor recovery. The Houston Galleria and Energy Corridor trophy product registered positive absorption for the first complete quarter since 2019, with energy services, oil and gas exploration, midstream operators, and energy financial services tenants representing the demand drivers. Downtown Houston trophy product sustained modest absorption through Q1 2026, while suburban West Houston and Westchase commodity inventory continued the national reset. Houston Medical Center sustained positive absorption tied to healthcare administration, life sciences, and medical research demand. Houston's office-to-residential conversion pipeline expanded modestly through 2025 and Q1 2026, primarily in downtown and Galleria-adjacent commodity inventory.

Phoenix's Q1 2026 office market reflected the most diversified demand profile among Southwest metros. The Camelback Corridor, Scottsdale Airpark, and Tempe trophy product sustained positive absorption, with financial services, technology, healthcare, and consumer brands representing the diversified demand cohort. Phoenix sustained positive Sun Belt corporate inflow demand through 2025 and into Q1 2026, with California, Illinois, and Northeast corporate relocations representing meaningful demand anchors. The semiconductor manufacturing build-out tied to TSMC, Intel, and adjacent chip manufacturing investment sustained selective office demand in northwest Phoenix and Chandler corridors. Suburban Phoenix Class B commodity inventory in older Scottsdale, North Phoenix, and southeast valley submarkets continued the national reset.

Las Vegas's Q1 2026 office market reflected the most distinctive demand profile among Southwest metros, anchored by hospitality and financial services demand. Summerlin and downtown Las Vegas trophy product sustained positive absorption, with financial services, technology, and hospitality-adjacent corporate tenants representing the demand drivers. Las Vegas's office market remained meaningfully smaller in absolute square footage terms than peer Southwest metros, but registered positive absorption fundamentals through 2025 and into Q1 2026. Older Las Vegas commodity inventory in suburban Henderson and North Las Vegas continued the national reset.

Capital markets activity in Q1 2026 across the Southwest office region clarified a pattern that had been forming through 2025: institutional capital was again willing to underwrite Southwest trophy, corporate relocation-anchored, and semiconductor corridor-adjacent office assets at spreads materially tighter than prevailing 2024 levels. CMBS execution on Southwest office collateral expanded versus 2024-2025 lows, with conduit lenders favoring grocery-anchored mixed-use, trophy Class A, and selectively-underwritten suburban Class A product. Life insurance company allocations to Southwest trophy office expanded modestly. Bridge lending on repositioning, lease-up, and conversion-ready product cleared at spreads consistent with broader institutional research benchmarks for stabilizing Southwest office collateral.

The Q1 2026 Southwest office report is intended for institutional sponsors, family office principals, REIT operators, life insurance company portfolio managers, CMBS investors, and developer-sponsors evaluating financing strategy across Southwest office assets. The capital markets framing emphasizes Bridge, CMBS, and LifeCo execution as the dominant institutional debt pillars, with SBA 7(a) and 504 financing available for owner-user Southwest office acquisitions meeting fifty-one percent owner-occupancy thresholds under the June 2025 SBA Standard Operating Procedure.

The Southwest office region's Q1 2026 fundamentals reflected the second-strongest aggregate position among U.S. office geographies tracked in this series. Direct vacancy across the five primary Southwest markets averaged in the high-teens range, modestly below the U.S. office aggregate and meaningfully below West Coast and Northeast gateway aggregates. Sublease vacancy compressed for the fourth consecutive quarter, with Austin registering the largest sublease reduction in absolute square footage terms tied to supply digestion. Trophy and Class A+ asking rent growth registered positive across all five primary metros, with Dallas Uptown, Austin Domain, and Phoenix Camelback Corridor trophy product clearing at the strongest rent growth trajectories.

Dallas-Fort Worth

Dallas-Fort Worth's Q1 2026 office fundamentals reflected the most pronounced corporate relocation absorption story among Southwest metros and arguably among all U.S. office markets. Uptown Dallas trophy product sustained the strongest absorption fundamentals in the region, with financial services, professional services, and healthcare administration tenants representing the dominant demand pool. The Crescent, Park District, Hall Arts, and Knox-Henderson trophy submarkets sustained positive absorption through 2025 and into Q1 2026. Plano's Legacy West and adjacent corporate campus submarkets sustained positive trophy absorption, with Toyota, JPMorgan, Liberty Mutual, FedEx Office, and adjacent corporate tenants anchoring trophy demand.

Frisco's Q1 2026 fundamentals reflected the most distinctive Dallas-area submarket dynamics. The Star and Frisco Square trophy submarkets sustained the strongest per-capita office absorption among Dallas metros, with Dallas Cowboys-anchored mixed-use placemaking sustaining trophy demand through 2025 and into Q1 2026. Frisco's office demand profile continued reflecting structural drivers that distinguished it from peer Dallas submarkets: corporate relocations seeking premium trophy product with mixed-use placemaking adjacency, family office and private wealth concentration, and growing financial services and professional services concentration.

The Las Colinas corridor and Westlake corporate campus submarkets sustained positive absorption tied to Charles Schwab, ExxonMobil, Pioneer Natural Resources, and adjacent corporate tenants. Older suburban Las Colinas commodity inventory continued the national reset, with several conversions to multifamily and alternative uses advancing through 2025 and Q1 2026. The Dallas suburban Class B reset continued in older Richardson, Addison, and Far North Dallas commodity inventory, with note sales, REO dispositions, and conversion feasibility studies defining the workout trajectory.

Austin

Austin's Q1 2026 office fundamentals reflected the most pronounced supply digestion story among Southwest metros. The Domain trophy submarket sustained the strongest absorption fundamentals in the metro, with technology, financial services, and consumer brands representing the dominant demand cohort. Apple, Indeed, Amazon, and adjacent technology corporate footprints sustained positive trophy absorption through 2025 and into Q1 2026. Downtown Austin trophy product sustained positive absorption, with financial services, technology, and professional services tenants representing the demand drivers.

East Austin and the Mueller Airport corridor sustained positive absorption tied to creative industries, technology, and consumer brands. Austin's 2023-2025 trophy and Class A delivery pipeline had been substantial, with several institutional research benchmarks placing aggregate Austin office supply additions among the highest per-capita levels in the United States. The Q1 2026 supply digestion inflection signaled an early phase of supply absorption that institutional research projected to accelerate through 2026 and into 2027. Concession packages, free rent periods, and TI allowances remained elevated on stabilizing 2024-2025 trophy deliveries, reflecting the supply digestion environment.

Older suburban Cedar Park, Round Rock, and southwest Austin commodity inventory continued the national reset trajectory. Several Austin suburban office conversions to multifamily and alternative uses advanced through 2025 and Q1 2026. The Texas state-level adaptive reuse environment supported conversion economics on suitable Austin assets, though pipeline scale remained meaningfully below Atlanta and select Northeast gateway comparables.

Houston

Houston's Q1 2026 office fundamentals reflected the early stages of a multi-year energy corridor recovery. The Galleria trophy submarket sustained positive absorption, with energy services, financial services, and professional services tenants representing the demand drivers. The Energy Corridor sustained positive absorption for the first complete quarter since 2019, with oil and gas exploration, midstream operators, and energy services tenants representing meaningful demand. Downtown Houston trophy product sustained modest absorption, with energy financial services and professional services tenants representing the dominant demand cohort.

Houston Medical Center sustained positive absorption tied to healthcare administration, life sciences, and medical research demand. The Texas Medical Center and adjacent medical office trophy submarkets registered the strongest medical office absorption fundamentals in the Southwest region. Suburban West Houston, Westchase, and northwest Houston commodity inventory continued the national reset. Houston's office-to-residential conversion pipeline expanded modestly through 2025 and Q1 2026, primarily in downtown and Galleria-adjacent commodity inventory. The Texas state-level adaptive reuse environment supported conversion economics on suitable Houston assets.

Phoenix

Phoenix's Q1 2026 office fundamentals reflected the most diversified demand profile among Southwest metros. The Camelback Corridor trophy submarket sustained the strongest absorption fundamentals in the metro, with financial services, technology, healthcare, and professional services tenants representing the diversified demand pool. Scottsdale Airpark and Old Town Scottsdale trophy submarkets sustained positive absorption, with financial services, family offices, and consumer brands representing the demand drivers. The Tempe trophy submarket sustained positive absorption, with technology, financial services, and university-adjacent tenants representing meaningful demand.

Phoenix's Sun Belt corporate inflow demand sustained positive absorption through 2025 and into Q1 2026, with California, Illinois, and Northeast corporate relocations representing meaningful demand anchors. The semiconductor manufacturing build-out tied to TSMC's northwest Phoenix campus, Intel's Chandler expansion, and adjacent chip manufacturing investment sustained selective office demand in northwest Phoenix and Chandler corridors. The semiconductor-adjacent office demand pattern represented a distinctive Phoenix-specific growth driver that institutional research consistently characterized as material differentiation versus peer Sun Belt office demand profiles.

Suburban Phoenix Class B commodity inventory in older Scottsdale, North Phoenix, and southeast valley submarkets continued the national reset. Several suburban Phoenix office conversions to multifamily and alternative uses advanced through 2025 and Q1 2026. Arizona's state-level adaptive reuse environment supported conversion economics on suitable Phoenix assets.

Las Vegas

Las Vegas's Q1 2026 office fundamentals reflected the most distinctive demand profile among Southwest metros. Summerlin trophy product sustained positive absorption, with financial services, technology, and corporate headquarters tenants representing the demand drivers. The Howard Hughes Corporation's Summerlin master-planned community sustained the strongest trophy office absorption fundamentals in Las Vegas, with corporate headquarters relocations from California representing meaningful demand. Downtown Las Vegas and the Strip-adjacent submarkets sustained modest absorption tied to hospitality, financial services, and professional services demand.

Older Las Vegas commodity inventory in suburban Henderson, North Las Vegas, and southwest valley submarkets continued the national reset. Las Vegas's office market remained meaningfully smaller in absolute square footage terms than peer Southwest metros, but registered positive absorption fundamentals through 2025 and into Q1 2026 that distinguished it from West Coast gateway weakness. Nevada's state-level absence of corporate income tax sustained corporate relocation demand into Q1 2026.

Texas — Dallas-Fort Worth

Dallas-Fort Worth's state-level Q1 2026 office dynamics reflected the most pronounced corporate relocation absorption among U.S. office markets. Uptown Dallas trophy direct vacancy compressed into the low teens to mid-teens for the highest-quality Class A+ inventory, with asking rents registering positive growth on a trailing-twelve-month basis. Plano's Legacy West and Frisco's Star trophy submarkets sustained the strongest per-capita absorption fundamentals among Dallas metros. The Las Colinas corridor and Westlake corporate campus submarkets sustained positive absorption tied to Charles Schwab, ExxonMobil, and adjacent corporate tenants. Texas's state-level absence of corporate income tax, paired with selective economic development incentives, sustained corporate relocation demand into Q1 2026. The Dallas suburban Class B reset continued, with several institutional research benchmarks placing Class B Dallas office values well below pre-pandemic peaks.

Texas — Austin

Austin's state-level Q1 2026 office dynamics reflected the most pronounced supply digestion story among Southwest metros. Domain trophy direct vacancy held in the mid-teens for the highest-quality Class A+ inventory, with concession packages on stabilizing 2024-2025 trophy deliveries remaining elevated. Downtown Austin trophy direct vacancy registered modest compression through Q1 2026. East Austin and Mueller submarkets sustained positive absorption. Older suburban Cedar Park, Round Rock, and southwest Austin commodity inventory continued the national reset, with several conversions to alternative uses advancing through 2025 and Q1 2026. Texas's state-level technology and corporate relocation incentive framework sustained Austin's corporate inflow narrative.

Texas — Houston

Houston's state-level Q1 2026 office dynamics reflected the early stages of energy corridor recovery. The Galleria and Energy Corridor trophy submarkets registered positive absorption for the first complete quarter since 2019, with Energy Corridor positive absorption representing a particularly meaningful institutional inflection. Houston Medical Center sustained positive absorption tied to healthcare administration and life sciences demand. Downtown Houston trophy product sustained modest absorption. Suburban West Houston, Westchase, and northwest Houston commodity inventory continued the national reset. Houston's office-to-residential conversion pipeline expanded modestly through 2025 and Q1 2026.

Texas — San Antonio and Secondary Texas Markets

San Antonio represented a meaningful secondary Texas office market in Q1 2026, with downtown San Antonio and the Stone Oak trophy submarket sustaining positive absorption on smaller Class A trophy product. USAA, Valero, and adjacent corporate headquarters anchored San Antonio's institutional office demand. El Paso's smaller-scale office market sustained modest absorption tied to federal employment, healthcare, and corporate professional services. Texas's broader Sun Belt corporate inflow narrative continued sustaining secondary Texas market absorption through 2025 and Q1 2026.

Arizona — Phoenix

Phoenix's state-level Q1 2026 office dynamics reflected the most diversified demand profile among Southwest metros. Camelback Corridor trophy direct vacancy held in the low to mid-teens for the highest-quality Class A+ inventory, with asking rents registering positive growth through 2025 and into Q1 2026. Scottsdale Airpark, Old Town Scottsdale, and Tempe trophy submarkets sustained positive absorption. The semiconductor manufacturing build-out in northwest Phoenix and Chandler sustained selective office demand. Suburban Phoenix Class B commodity inventory continued the national reset. Arizona's state-level technology and semiconductor economic development framework, paired with Maricopa County-level economic development incentives, sustained the corporate relocation thesis driving Phoenix office demand.

Nevada — Las Vegas

Las Vegas's state-level Q1 2026 office dynamics reflected the most distinctive demand profile among Southwest metros. Summerlin trophy direct vacancy held in the low to mid-teens for the highest-quality Class A+ inventory, with corporate headquarters relocations from California representing meaningful demand anchors. Downtown Las Vegas and Strip-adjacent submarkets sustained modest absorption. Nevada's state-level absence of corporate income tax sustained corporate relocation demand. Older Las Vegas commodity inventory in suburban Henderson and North Las Vegas continued the national reset.

Utah, New Mexico, and Mountain West Secondary Markets

Salt Lake City represented a meaningful secondary Mountain West office market in Q1 2026, with downtown Salt Lake City and the Cottonwood Heights trophy submarket sustaining positive absorption. Goldman Sachs, Adobe, and adjacent technology and financial services tenants anchored Salt Lake City's institutional office demand. Albuquerque and Tucson sustained smaller-scale Sun Belt office markets, with positive absorption on trophy product and ongoing commodity reset in older inventory. The broader Mountain West corporate inflow narrative continued sustaining secondary Southwest office demand through 2025 and Q1 2026.

Capital markets activity across the Southwest office sector during Q1 2026 reflected the most constructive institutional capital environment since 2022. Investment volume on Southwest office collateral expanded versus Q1 2025 lows, driven by accelerating Dallas-Fort Worth trophy absorption, Austin supply digestion-related opportunistic acquisitions, Houston energy corridor recovery transactions, Phoenix semiconductor-adjacent office acquisitions, and opportunistic distressed note sales on commodity Class B inventory across all primary Southwest metros. Cap rates on Southwest trophy office product compressed modestly versus 2024-2025 lows, with Dallas Uptown, Austin Domain, Phoenix Camelback Corridor, and Houston Galleria trophy transactions clearing at spreads tighter than peer Sun Belt office trophy comparables outside the Southeast aggregate.

Debt pricing on Southwest office collateral reflected the institutional capital framework. Ten-year fixed-rate financing for trophy and Class A+ Southwest office cleared at spreads materially tighter than 2024 comparable transactions, with several life insurance company allocations clearing at spreads consistent with industrial and multifamily trophy comparables. CMBS execution on Southwest office collateral expanded versus 2024-2025 lows, with conduit lenders favoring grocery-anchored mixed-use, trophy Class A, and selectively-underwritten suburban Class A product. CMBS spreads on Southwest office collateral compressed modestly versus 2024 highs, with Dallas trophy and Houston Galleria trophy transactions executing at the tightest spreads among Southwest office CMBS issuances.

The Bridge capital pillar represented the dominant institutional debt structure for repositioning, lease-up, and conversion-ready Southwest office assets through Q1 2026. Bridge spreads on stabilizing Southwest office collateral compressed modestly through Q1, with several institutional bridge lenders expanding allocations to Southwest trophy lease-up and supply digestion-focused opportunities. Bridge-to-permanent financing strategies continued representing the dominant institutional approach for Southwest office sponsors executing trophy lease-up, conversion-ready asset acquisitions, and stabilization programs. The Bridge-to-CMBS take-out strategy remained the most common institutional execution path, with select Bridge-to-LifeCo strategies executing on the highest-quality stabilizing trophy assets.

CMBS represents the primary institutional fixed-rate execution pillar for stabilized Southwest office trophy and semiconductor-adjacent assets. Cornovus Capital's CMBS Loan Program addresses ten-year fixed-rate execution on stabilized trophy office assets, providing institutional sponsors with non-recourse long-duration debt at competitive spreads. CMBS execution on Southwest office collateral expanded materially versus 2024-2025 lows through Q1 2026, with conduit lenders favoring Dallas Uptown trophy, Plano Legacy West, Austin Domain, Phoenix Camelback Corridor, and Houston Galleria trophy product. CMBS special servicing rates on Southwest office collateral remained meaningfully below West Coast and Northeast gateway comparables but elevated against historical norms.

Life insurance company allocations to Southwest trophy office expanded modestly versus 2024 lows. The LifeCo Loan Program at Cornovus Capital addresses long-duration fixed-rate execution on the highest-quality stabilized Southwest trophy office, semiconductor-adjacent, and conversion-ready assets. LifeCo execution windows on Southwest trophy office cleared at spreads tighter than CMBS comparables for the highest-quality life sciences-adjacent and trophy assets through Q1 2026. LifeCo allocations to Southwest office sustained selectivity, with execution typically limited to trophy Class A+ assets with institutional tenant rolls, long-duration leases, and conservative leverage profiles. Dallas Uptown trophy and Plano Legacy West trophy product registered the strongest LifeCo execution windows among Southwest office submarkets through Q1 2026.

Bridge debt represented the primary institutional execution pillar for Southwest office repositioning, lease-up, and conversion-ready asset acquisitions through Q1 2026. The Bridge Loan Program at Cornovus Capital addresses transitional debt execution on Southwest office assets pursuing trophy lease-up, conversion feasibility, and stabilization strategies. Bridge spreads on Southwest office collateral compressed modestly through Q1 2026, with institutional bridge lenders expanding allocations to Austin supply digestion opportunities, Houston energy corridor recovery transactions, and Dallas-Fort Worth trophy lease-up.

For owner-user Southwest office acquisitions meeting fifty-one percent owner-occupancy thresholds under the June 2025 SBA Standard Operating Procedure, SBA 7(a) and SBA 504 financing remain available institutional options. The SBA 7(a) Loan Program addresses owner-user Southwest office acquisitions where the operating business occupies at least fifty-one percent of the property. SBA 7(a) 100% commercial real estate financing remains available for highly qualified owner-user transactions where ownership debt service capacity stands independently of tenant rental income, supported by strong proforma analysis and assumption modeling. The SBA 504 Program provides long-duration fixed-rate execution for owner-user Southwest office acquisitions meeting June 2025 SOP qualification thresholds.

The Construction-to-Permanent financing structure for Southwest office assets in Q1 2026 was executed predominantly through Bridge-to-CMBS and Bridge-to-LifeCo take-out strategies, with limited stand-alone construction-to-permanent programs reflecting the broader institutional caution on new office construction. Several Southwest office trophy development pipelines that had been announced through 2023-2024 advanced into Bridge construction phases through 2025 and Q1 2026, with take-out execution targeted at 2027-2028 stabilization timelines through CMBS or LifeCo permanent debt placement. The semiconductor-adjacent office development pipeline in northwest Phoenix and Chandler sustained selective construction-phase activity through Q1 2026, with institutional bridge lenders allocating to qualifying semiconductor corridor development.

The Southwest office market entered Q1 2026 with the second-most attractive risk-adjusted return profile among U.S. office geographies tracked in this institutional research series, behind the Southeast aggregate. Dallas-Fort Worth corporate relocation absorption, Austin supply digestion, Houston energy corridor recovery, Phoenix semiconductor corridor build-out, and Las Vegas Sun Belt corporate inflow each represented distinctive demand drivers that distinguished Southwest office fundamentals from peer U.S. office regions.

The principal Southwest office opportunity in Q1 2026 was the Dallas-Fort Worth corporate relocation absorption story. Uptown Dallas, Plano Legacy West, Frisco Star, and Las Colinas corporate campus trophy product sustained the strongest absorption fundamentals among Southwest office submarkets, with financial services, professional services, and healthcare administration tenants representing the dominant institutional demand cohort. Dallas-Fort Worth trophy asking rent growth registered positive on a trailing-twelve-month basis through Q1 2026. Several institutional research benchmarks placed Dallas trophy office absorption among the strongest in the United States.

The second Southwest office opportunity reflected the semiconductor manufacturing build-out tied to TSMC, Intel, and adjacent chip manufacturing investment in northwest Phoenix and Chandler. The semiconductor-adjacent office demand pattern represented a distinctive Phoenix-specific growth driver that institutional research consistently characterized as material differentiation versus peer Sun Belt office demand profiles. The CHIPS Act federal investment framework, paired with Arizona state-level semiconductor economic development incentives, sustained semiconductor corridor office demand through 2025 and into Q1 2026.

The third Southwest office opportunity reflected the Houston energy corridor recovery. The Galleria and Energy Corridor trophy submarkets registered positive absorption for the first complete quarter since 2019, signaling the early stages of a multi-year energy office recovery thesis. Energy services, oil and gas exploration, midstream operators, and energy financial services tenants represented the dominant demand drivers. The Houston energy corridor recovery thesis represented a distinctive Southwest office opportunity that institutional research projected to sustain through 2026 and into 2027.

The principal Southwest office challenge in Q1 2026 was the Austin supply digestion environment. The 2023-2025 Austin trophy and Class A delivery pipeline had been substantial, with several institutional research benchmarks placing aggregate Austin office supply additions among the highest per-capita levels in the United States. Q1 2026 marked an early supply digestion inflection, but stabilization of 2024-2025 trophy deliveries remained meaningfully incomplete. Concession packages, free rent periods, and TI allowances remained elevated on Austin trophy product, reflecting the supply digestion environment. The Austin supply digestion was projected to extend through 2026 and into 2027.

The second Southwest office challenge reflected the commodity Class B and below subsector across all primary Southwest metros. Suburban Dallas, Austin, Houston, and Phoenix Class B inventory continued the national reset, with 1980s-1990s vintage product clearing through note sales, REO dispositions, and conversion feasibility studies. Several institutional research benchmarks placed Southwest Class B office values well below pre-pandemic peaks, with limited near-term recovery visibility absent capital improvement programs, repositioning strategies, or conversion to alternative uses.

The third Southwest office challenge reflected the trophy capital markets execution environment. While LifeCo and CMBS execution on Southwest trophy office expanded materially through 2025 and into Q1 2026, execution windows remained narrower than peer institutional asset class comparables. CMBS spreads on Southwest office collateral compressed modestly versus 2024 highs but remained wider than industrial and multifamily comparables. LifeCo allocations to Southwest office sustained selectivity, with execution typically limited to trophy Class A+ assets with institutional tenant rolls. Bridge execution remained the most readily available institutional debt pillar for Southwest office through Q1 2026.

The Q2 2026 Southwest office outlook reflects the second-most favorable forward indicator profile among U.S. office geographies tracked in this institutional research series, behind the Southeast aggregate. Trophy and Class A+ leasing absorption is projected to sustain the positive trajectory established through 2025 and Q1 2026, with Dallas Uptown, Plano Legacy West, Frisco Star, Austin Domain, Phoenix Camelback Corridor, Houston Galleria, and Summerlin Las Vegas anchoring the regional trophy thesis. Sublease vacancy compression is projected to continue through Q2 2026, with Austin sustaining the most pronounced sublease reduction trajectory tied to supply digestion.

Capital markets activity is projected to expand through Q2 2026 across the Southwest office sector. Investment volume on Southwest trophy office collateral is projected to accelerate, driven by institutional capital allocator expansion of Dallas-Fort Worth trophy allocations, Austin supply digestion-related opportunistic acquisitions, Houston energy corridor recovery transactions, Phoenix semiconductor-adjacent office acquisitions, and opportunistic distressed note sales on commodity Class B inventory. Cap rates on Southwest trophy office product are projected to compress modestly through Q2 2026.

Debt pricing on Southwest office collateral is projected to compress modestly through Q2 2026. Life insurance company allocations to Southwest trophy office are projected to expand, with execution windows on the highest-quality stabilized trophy assets clearing at spreads tighter than CMBS comparables. CMBS execution on Southwest office collateral is projected to remain selective and tilted toward grocery-anchored mixed-use, trophy Class A, and selectively-underwritten suburban Class A product. Bridge debt is projected to remain the primary institutional execution pillar for Southwest office repositioning, lease-up, and conversion-ready asset acquisitions.

Dallas-Fort Worth's office market is projected to sustain the strongest corporate relocation absorption story among U.S. office markets through Q2 2026. Uptown Dallas, Plano Legacy West, Frisco Star, and Las Colinas trophy product are projected to register positive absorption and modest asking rent growth, with financial services, professional services, healthcare administration, and selective technology tenants sustaining the institutional demand cohort. The Dallas suburban Class B reset is projected to continue, with note sales, REO dispositions, and conversion feasibility studies defining the workout trajectory.

Austin's office market is projected to sustain the supply digestion inflection through Q2 2026. Positive absorption is projected to modestly outpace delivery additions for a second consecutive quarter, with Domain trophy and downtown Austin trophy product sustaining the strongest absorption fundamentals. Concession packages on stabilizing 2024-2025 trophy deliveries are projected to remain elevated through Q2 2026, though selective concession reductions are projected on the highest-quality stabilizing assets. The Austin supply digestion is projected to extend through 2026 and into 2027.

Houston's office market is projected to sustain the energy corridor recovery thesis through Q2 2026. The Galleria and Energy Corridor trophy submarkets are projected to register positive absorption, with energy services, oil and gas exploration, midstream operators, and energy financial services tenants sustaining the demand drivers. Houston Medical Center is projected to sustain positive absorption tied to healthcare administration, life sciences, and medical research demand. Suburban West Houston, Westchase, and northwest Houston commodity inventory is projected to continue the national reset trajectory.

Phoenix's office market is projected to sustain the most diversified demand profile among Southwest metros through Q2 2026. Camelback Corridor, Scottsdale Airpark, Old Town Scottsdale, and Tempe trophy product is projected to register positive absorption, with financial services, technology, healthcare, and consumer brands sustaining the diversified demand pool. The semiconductor manufacturing build-out in northwest Phoenix and Chandler is projected to sustain selective office demand. Suburban Phoenix Class B commodity inventory is projected to continue the national reset trajectory.

Las Vegas's office market is projected to sustain the most distinctive demand profile among Southwest metros through Q2 2026. Summerlin trophy product is projected to register positive absorption, with financial services, technology, and corporate headquarters tenants sustaining the demand drivers. Nevada's state-level absence of corporate income tax is projected to sustain corporate relocation demand. Older Las Vegas commodity inventory in suburban Henderson and North Las Vegas is projected to continue the national reset trajectory.

Cornovus Capital views the Q2 2026 Southwest office capital markets environment as one of the most favorable institutional execution windows for U.S. office capital placement since 2022. Dallas-Fort Worth corporate relocation absorption, Austin supply digestion inflection, Houston energy corridor recovery, Phoenix semiconductor corridor build-out, and Las Vegas Sun Belt corporate inflow combine to support a Southwest office investment thesis that institutional research consistently characterizes among the most attractive U.S. office regional theses. Cornovus Capital's institutional capital framework, emphasizing Bridge, CMBS, and LifeCo execution as the dominant institutional debt pillars, paired with SBA 7(a) and 504 conditional pathways for owner-user transactions meeting June 2025 SOP thresholds, supports Southwest office sponsors evaluating Q2 2026 financing strategy across trophy acquisitions, repositioning programs, conversion-ready asset acquisitions, and stabilization execution. Cornovus Capital welcomes a confidential institutional dialogue on Q2 2026 Southwest office financing strategy.