By BEX Staff for AZBEX
Office
Metro Phoenix saw no new Office projects break ground in Q2, and the only delivery was a 32KSF build-to-suit for Immedia in the Northeast Valley/Scottsdale submarket.
The market saw a negative net absorption rate of nearly 935.8KSF after Q1 was nearly flat. Class A and Class B properties had combined negative net absorption of slightly more than 1MSF. Class C properties, meanwhile, had positive net absorption of 80.3KSF. Overall, buildings with large available areas have encountered difficulties, while those smaller than 50KSF have done well.
The vacancy rate increased to 24.6%, which is the highest since 2014. The availability rate rose 100 basis points to 28.0%. Sublease space was recorded at 6.8MSF, 88.7% of which was vacant. Nineteen of the 45 10KSF-plus moveouts recorded over the quarter were taken as vacant subleases.
Full-service gross asking lease rates increased to $30.94/SF, up from $30.29/SF in Q1. Year-over-year lease rates were up $1.94, and the three-year average growth rate for the market was 3.6%.
Industrial
In the Industrial market, there is currently 52.4MSF under construction Valley-wide, with 32.3MSF of that total taking place in the Southwest Valley. Preleased space accounts for approximately 16.2% of space under construction.
On the other end of the pipeline, 1.7MSF was delivered across 15 buildings in Q2. Net absorption for the quarter was 1.5MSF.
Construction started on another 10MSF, 76.4% of which was for warehouse and distribution.
Vacancy increased slightly, rising by 100 basis points over the quarter to settle at 3.4%. For comparison, the average vacancy over the past 10 years has been 7.3%.
The direct average NNN lease rate went down slightly over the quarter to $1.11/SF. The Southwest Valley had the lowest rate at $0.81/SF due to the heavy volume of available space. The Northeast Valley continues to hold the highest rates at $1.43/SF.