Source: Colliers International
Colliers International published its Research & Forecast Reports for Q1 2015 in the Phoenix market, including the Phoenix Industrial Report Q1 2015 and the Phoenix Office Report Q1 2015. Some highlights of those reports are listed below.
Q1 2015 Phoenix Industrial Report
Vacancy Improves, Even as New Projects Come Online
Net absorption in the Greater Phoenix industrial market topped 1.5 million square feet in the first quarter, the fourth straight quarter of more than 1 million square feet.
In the past 12 months, net absorption has totaled more than 8.1 million square feet, but developers have also delivered more than 5.4 million square feet of additional inventory. New product has included a mix of spec and build-to-suit projects.
While new projects continue to come online, vacancy is trending lower due to healthy tenant demand for space. Vacancy ended the first quarter at 11.8 percent, 180 basis points lower than one year ago. This marked the first time since early2008 that the vacancy rate has dipped below 12 percent.
Sales of industrial buildings slowed in the first quarter, but prices continued to rise. The median price in the first quarter was $73 per square foot, 7 percent higher than the 2014 median.
Q1 2015 Phoenix Office Report
Office Development to Gain Momentum in 2015
Vacancy in the Greater Phoenix office market leveled off in the first quarter, remaining at 17.8 percent after closing 2014 at the same figure. Year over year, vacancy has improved by 100 basis points.
Vacancy is improving at the most rapid pace in the Class A segment, where the rate has fallen 160 basis points in the past 12 months to 16.7 percent. More than 90 percent of the total net absorption in the first quarter occurred in Class A buildings.
Net absorption totaled nearly 199,000 square feet in the first quarter, lagging the totals recorded in the second half of last year. Despite the recent slowdown, net absorption has been positive in each of the past 12 quarters.
Development activity is picking up. More than 1.3 million square feet of spec space is under way, following the delivery of less than 550KSF of spec space in 2014. In addition to the spec construction in the market, build-to-suit projects are also in the development pipeline, headlined by the 2.1-million square foot State Farm complex.
Asking rents continue to push higher, ending the first quarter at $21.28 per square foot, 3.3 percent higher than one year ago. The introduction of newer, more expensive space into the market could push overall rents higher.