The Phoenix office market has achieved 24 straight quarters – or six straight years – of positive net office space absorption, according to the JLL Q2 Phoenix Office Insight report. At the same time, vacancy has decreased by 11 basis points, marking its lowest level in almost 12 years.
According to JLL, the Phoenix office market ended the second quarter with 2.17MSF of year-to-date net absorption, a rate that exceeds the last peak in the market, which occurred in 2016. The overall vacancy rate sits at 17.8 percent and average asking rents have reached $27.18 per-square-foot, a notable 22 percent increase year-over-year.
There is currently 1.9MSF of active new office construction underway. This adds to 546KSF of new space delivered during the second quarter, including two Allred buildings totaling 270KSF within the Price Road Corridor in Chandler and the 123KSF Chaparral III building on Pima Road in Scottsdale.
According to projections, however, this still falls short of meeting the demands of prospective tenants who collectively are looking for 3.2MSF of space and already have signed 1MSF in leases that are expected to occupy by year end.
“The Phoenix office market continues to have unprecedented leasing activity, making it one of the tops in the nation for positive net absorption,” said JLL Senior Vice President Chris Latvaaho. “The demand for space continues to outpace our existing supply and includes a growing list of premier, out-of-state companies who have planted a corporate flag here in the Valley.”
Companies establishing a new Valley location this year alone include Benchmark Electronics from Texas and Bridgepoint Education from California.
Demand among organizations like these keep REITS, institutional investors, private and foreign capital interested and active in the metro Phoenix market, particularly within the Camelback Corridor, Downtown/Midtown and Southeast Valley submarkets. Together, this activity represented more than $271M in transactions during the second quarter, a 36 percent increase over the first quarter.